23 May 2022
7 Min Read

Understanding Housing Insurance

Your home is probably the most important asset under your ownership. Thinking about Home insurance insuring your home, therefore, should go without saying.

But blatantly browsing for insurers without any prior knowledge or experience is dangerous. There are many pitfalls involved, and the insurers always aim to squeeze the biggest possible premium out of you.

This entry will help you wrap your mind around housing insurance. Get informed, understand it better, and then go out and get the best premium for you.

What Is House Insurance?

Home insurance, housing insurance, homeowners insurance, residential insurance, and house insurance, are all pretty much the same thing in this context. These terms are used interchangeably to refer to the product that protects both either your property (the buildings) and your belongings inside it (the contents), or both..

Residential insurance is divided into three categories:

  • Buildings insurance
  • Contents insurance
  • Combined insurance (Buildings and Contents combined)

To understand the essence of house insurance, you need to familiarise yourself with each of these three categories. Every house insurance policy includes cover for either depends on buildings, contents, or both (combined) insurance..

Buildings Insurance

This insurance type pertains to your property’s structure. It covers the costs of repairing structural damage.

This part of house insurance includes the walls, the windows, and the roof of the house – meaning the actual structure. Permanent fittings and fixtures also fall under this aspect of house insurance. These fixtures include toilets, baths, fitted kitchens, etc.

Buildings insurance will cover the cost or part of the cost of rebuilding a home “from the ground up”, ie from an empty site..

Keep in mind that buildings insurance only needs to cover your home’s rebuild value, not its’ tends to differ from a home’s actual market value (which is usually a lot higher). Services such as like site clearance, demolition, as well as various architectural fees etc, are generally also included in rebuild costs.here.

Here are some examples of what kind of losses and damages usually  is covered by buildings insurance:

  • Natural disasters, floods, storms
  • Explosions, fire, smoke damage
  • Fallen trees, aerials, lamp posts, satellite dishes
  • Malicious damage and vandalism
  • Subsidence (also known as “heave”, “landslip” or “tree root damage”)
  • Aircraft and other vehicle collisions

Contents Insurance

Unlike buildings insurance, contents insurance is directed towards the interior part of your home. It pertains to the cost of replacing various stolen, damaged, or destroyed belongings within the insured contents-insured object property.

To understand contents insurance, you need to understand what “contents” entail. Generally, the items that are taken with the resident when they’re moving out of a home are considered “contents”.

The complete list of these items would be huge. Here are some common items that fall under the “contents” category:

  • Movable Furniture eg like beds, wardrobes, sofas, tables, chairs, etc.
  • Soft furnishings eg like curtains, beddings, cushions, etc.
  • Kitchenware, including cookware, cutlery, kettles, microwaves
  • Entertainment items, such as video games, CDs, DVDs, and toys
  • Electrical items such as TVs, computers, and various gaming consoles
  • Clothing items and jewellery
  • Antiques and ornaments

Combined Insurance

Buildings and contents insurance policies can be bought separately. Claims for Ccontents insurance tends to be very common, usually lower-value claims for safeguard your home against various forms of theft and  and damage. On the other hand, claims for buildings insurance are generally rarer and larger e.g. for fire, flood, explosion, subsidence.covers the cost of serious damage to your actual house or the insured object.

Combined insurance essentially brings together buildings and contents insurance into a single policy more comprehensive insurance option. Insurers will often offer premium deals for people who want to opt for both types of housing insurance.cover in the same policy.

How Much Housing Insurance Do You Need?

Seeing as to how homeowners insurance is a the most vital type of insurance, the cost can  home insurance cost is also be significant. Ideally, you’ll want to opt for the highest possible premium, covering all the fine details. This level of peace of mind can be is worth the price for some people..

However, paying up for this absolute peace of mind isn’t realistic for everyone. Most people will have to compromise in this department. In some cases, people forego contents insurance entirely and focus on insuring the structural aspects of their home. In other cases, people go with contents insurance only, to curb the home insurance cost in a different way though. in many cases the bank which has lent using your property as security will insist on at least buildings insurance.

This isn’t the only way to come up with a homeowners-insurance premium that fits your needs.

For example, there are two types of buildings insurance policy: sum-insured rated and bedroom-rated. Bedroom-rated insurance is based on the number of bedrooms in your home. If you go with this buildings  insurance type, the insurer insurance issuer will calculate your premium estimate the costs involved with based on the rebuilding your home by the number of bedrooms. With this homeowners insurance sub-type, expect the home insurance cost to go up. It is a more comprehensive and straightforward and simple calculation choice, but expect insurers to err on the side of caution (over-estimate) .the actual value of your property and its’ contents. Thus, this can be a good choice if you have more contents than “average” for the number of bedrooms you have, as you are not at risk of under-estimating their value.

On the other hand, a The sum-insured rated policy requires you to estimate the rebuild cost (not the market value) of your home (for buildings cover) and/or the value of your home’s contents (for contents cover). Thus, it is a less straightforward calculation, and the risk is on you if under-estimate the values to be insured.  Thus, this can be a good choice if you want a more bespoke premium. Bear in mind though, that buildings insurance type is more convenient regarding the home insurance cost, but it can actually end up being higher or lower in terms of price in the end. Yes, it’s more flexible, but this doesn’t necessarily mean “cheaper”. Over time, the cost of rebuilding your property will increase (eg with all the renovations and upgrades) and you tend to accumulate more contents in your home over time.. You can Opt for index-linked policies to have your policy cover follow your home’s value. This will ramp up the home insurance cost, though.automatically increase each year with an “average” index but the risk is that you end up being over-insured (eg if you do not buy new items frequently).

An index-linked policy is an insurance option that follows changes in the cost of rebuild materials. For instance, if your home is being rebuilt and the cost of bricks has increased since the original building efforts, the insured amount is also going to be higher. 

You need to carefully think about how much coverage you need before signing the papers.

What Type of Housing Insurance Do You Need?

The biggest mistake that homeowners tend to make when choosing their home insurance cover is aiming to insure every aspect of their home. Don’t misinterpret this – if you can afford it, and if your home is worth a lot, you should go with the highest possible home protection insurance policy premium.


But most homeowners end up going around in circles, trying to protect everything, but without enough financial means for that sort of a home insurance cover.

In truth, both buildings insurance and contents insurance can be are essential parts of your home protection insurance policy. Fail to protect your home from natural disasters, falling trees, large fires, floods, and similar unfortunate events, and the contents of your home won’t matter much. In contrast, thefts are much more reasonable and frequent occurrence than natural disasters, which are the main (although not the only) focus of the contents home insurance cover option.

If you live in a relatively small home and can’t afford both covers, consider going with contents insurance only. That way, even if a natural disaster occurs, you might be eligible for coverage. Bear in mind, that if your home is mortgaged, the bank which has lent you the money using your property as security will insist on at least buildings insurance.

If you live in a large home, focusing on your buildings home protection insurance policy is probably the smart way to go. Owning a family-sized house can always be turned into money, and the indoor contents are replaceable.

Not being able to opt for the combined home protection insurance policy is unfortunate but, in some instances, necessary. The alternative here is talking to your insurance company and asking them to customise a combined policy so you can afford it. If you’re trying to save up some money by not going with the appropriate insurance policy that you need, you’re taking a formidable risk.

Talk to your insurance professional, consider the rebuild cost, and think about the value of your contents. However, don’t allow yourself to buy a higher premium than you need. Overselling is what insurance salespersons are particularly good at. Be wary of this.

Don’t Compromise on Housing Insurance

Be sure to make yourself aware of the insurance policy types that are available for you. Understand the premiums that an insurance company offers. But don’t sign with the first insurer you come across. Always be on the lookout for a better deal.

On the other hand, you should never compromise on your residential insurance policy. Trying to cut your losses by opting for a lower insurance policy coverage might lead to more significant problems further down the line.