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Contents insurance explained

This contents insurance buyers' guide outlines the types of contents insurance and issues you need to be aware of as a buyer of contents insurance.

Contents insurance covers the possessions in your house – things like electrical appliances, furniture and clothes.

If you would take it with you when you move home, it's probably covered by contents insurance.

You're usually protected against theft and damage from fire, flooding, falling trees and so on.

Unless you pay extra, however, you're not usually covered for accidents you cause – so be careful with the paint...

Types of contents insurance – the content insurance buyers' guide

How much you get if you make a claim depends on what sort of cover you have:

Type of contents cover	What the insurance covers
Indemnity cover	The cheapest cover, as you get only the current (i.e. second hand) value of the item.
New for old	Replaces the item with an equivalent new one (there's usually a wear and tear deduction for clothing).
Accidental damage	Covers against accidents. Without it, you're not covered if you spill paint on your carpet, for instance.
All risks	For items you take out of the house – jewellery, MP3 players, cameras, phones etc.

Make sure you read your policy document so you understand what is covered and when.

Cover limits

Also, if you have a lot of jewellery, or electrical equipment, or high-value items (over £1,000, say) these may not be covered automatically.

If so, tell the insurer about them – they may cover them automatically or for a small fee.

What affects your contents insurance premium

You address is the biggest influence on whether you get cheap contents insurance.

Insurers use your postcode to assess the risk of your making a claim.

If yours has a low risk of flooding and no history of crimes, you'll benefit from lower contents insurance bills.

Insurance companies also take account of YOU – your claims history, how old you are, what sort of security your house has and so on.

Why insurance bills vary

However, different insurers have different experiences of postcodes and people, and take different views of risk.

What's more, they might specialise in a certain area of the market, such as insurance for older people or low-risk areas – so they'll offer better rates to these people.

As a result, insurance quotes vary hugely. So it's always worth shopping around.

You can also reduce your risk of claiming – which might increase your premium next time - by being careful:

• Don't leave windows open overnight.
• If you go on holiday, put lights on timers and cancel milk and paper deliveries to reduce the risk of burglars realising you're away.
• Think about installing motion-sensitive security lights.
• Insulate pipes to avoid frozen ones causing leaks in winter.

Levels of contents cover

As we explain in our tips on how to lower your insurance bills, it's important to get the right level of cover.

However, don't under insure to lower your bill. If you say your contents are worth less than they are, you won't get the full amount back if you need to claim (so review the amount of cover each year).

Under insurance

Imagine you say you need £25,000 of cover, but own £50,000-worth of contents.

If you make a claim, the insurer could assess your belongings to see their true worth – and reduce your payout accordingly.

So in this example, you've only insured half your belongings. This means that if you made a £10,000 claim, you would only get half back – just £5,000.

Bedroom rated vs. sum-insured

Some policies assume a level of cover based on your number of bedrooms. These are called bedroom-rated (as opposed to sum-insured) policies.

Work out how much cover you need anyway – the level of bedroom-rated cover might not be enough. You also need to know the right amount to compare the two types of policy.

Contents insurance explained guide brought to you by LowerMyBills from Experian

The LowerMyBills guide to contents insurance was created to help you understand content insurance types, what affects contents insurance, and levels of contents cover, giving you the information you need to make an informed decision when you next buy contents insurance.

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