Get Your Head Round Property Insurance

by : P Green

There's something that happens in every house in the UK every year. No-one looks forward to it, but at the same time they get an odd feeling of peace of mind from it.

What is it? It's the process of renewing property insurance.

There are few of us that sit there looking through our diaries, jumping with glee at the thought of another year's renewal notice dropping through the letterbox. But it's an essential insurance to have.

Of course there are two distinctive types of property insurance that you would normally buy. We take a look at them, why you would buy them, and how you can benefit from them (we can't make you pleased to buy insurance, but it's good to know exactly why you need it!).

First off is the big one: buildings insurance. If you have a mortgage, your lender will insist that you buy property insurance that covers the cost of re-building your house in the event of a large number of calamities affecting it.

These can include explosions, damage from lightning, fire or smoke damage, trees falling onto the house, and vandalism or other malicious damage. Cover also normally includes an airplane landing on the property, or the more likely (if still statistically unlikely) event of damage caused by something falling from an aircraft.

Subsidence and flooding is covered, with a large excess if the property has been affected by these problems before. So will smaller problems which cause less damage but still cost a small fortune to repair, such as water damage from a burst pipe, or the collapse of your TV aerial.

When your mortgage company insists you get buildings insurance, this is them covering their own back. If they lend you £150,000 secured on a house, and that house falls down, but you don't have the funds to rebuild it (as you didn't have adequate property insurance), they will have a loan secured on rubble.

And the chances are you would declare yourself bankrupt rather than try to pay back a mortgage on nothing as well as buy another property.

However don't think you must buy property insurance from your lender. They will often bundle a quote into a mortgage offer, but you don't have to get it from them. It can be cheaper to buy cover elsewhere, especially if you use a comparison search engine on the internet.

This is a good way to keep costs down if you get into property development (more info at

The other common type of property insurance is there to protect your contents. This is optional, but highly advisable for every single house, even if you are renting from a landlord.

If you did have fire or flood damage in your property (and with the number of flood warnings out again this week, the chances of a natural catastrophe affecting houses seems high) you'd be surprised by the damage done to your possessions.

Even a small fire can wreck an entire house because of the intensity of the smoke produced. Just a little flood water will destroy everything it touches, as it is often filthy.

Every householder should invest in adequate contents insurance. Don't be tempted to skimp on it. You might think you could buy the entire contents of your house for £50,000, but when you add up the true cost of replacing every single possession you have spent years accumulating, the bill could be horrendous.

Walk through your house and make a list of the potential costs of replacing everything with brand new items. When it comes to property insurance for your contents, it's always worth over insuring.