What is buildings insurance for?

Everyone knows that home insurance is a good idea – well, we’re told it is and plenty of people see the sense in having cover that pays out should their home and possessions be destroyed in a fire, for example. However far less people realise that home insurance comprises of two elements – buildings and contents. What’s the difference?

Our way of explaining it is to imagine you’re a giant; you pick up a house, pull the roof off, and tip the house upside down. Anything that falls out is covered by contents insurance – typically, electronics, pictures, kitchenware, sofas, etc. Everything else – walls, roof, carpets, bath, and so on, is covered by buildings insurance.

So if, for example, you were to discover you had rising damp in your home and it was going to cost several thousand pounds to repair, you could claim against your buildings insurance policy. ‘Could’ being the important word here. If the insurance company were to discover that the damp had been there for several years and you had just never bothered to do anything about it until now, there is a very good chance they would not pay up. The same could happen if part of your roof was blown away in a storm and the insurance company found out that several tiles has been missing or damaged beforehand.

This is because part of the terms and conditions in many buildings insurance policies is you must keep the building in good repair. This means if your roof becomes damaged through age or wear and tear it should be repaired as soon as possible. The same if you discover damp, or anything else wrong.  If you were paying to fix something wouldn’t you prefer to spend £200 on a small job rather than waiting for it to become a serious problem and spending £2000? It’s the same for an insurance company, only they make it part of a legal agreement.

The other main thing buildings insurance covers is the rebuild cost of your home – if your home was completely demolished and had to be rebuilt from scratch, what would it cost? This is NOT the same as how much you bought it for, it tends to be a lot less, and many people scratch their heads over this question on the insurance forms.

If you had a survey done of your home when you first bought it there should be a rebuild cost listed there. If your survey was done a few years ago you may need to factor in inflation for the rebuild cost. Your insurer may be able to help. Otherwise you could try a rebuild cost calculator, such as the one provided by the Building Cost Information Service and Association of British Insurers.

It is always worth checking the terms and conditions of an insurance policy carefully to see what is, and what isn’t, covered, especially if there are special conditions you think should be covered. For example, if you live by a river you may want to ensure you have cover for flood damage. An insurance company may be happy to quote you for flood cover but because of the increased risk you can be sure that they will charge you a higher premium, and they may even impose a limit on the pay-out and extra conditions upon you as part of the agreement (such as having sandbags available at all times and not covering damage to carpets). If in doubt, speak to someone from the insurance company.