Home insurance terms can be confusing, but they’re essential to understanding your policy and what kind of coverage you have. Here are some of the most important home insurance terms that everyone should know.
Premium
The amount you pay to have a policy. Premiums are complex to calculate and take into consideration everything from the value of your home/contents to the burglary rates in your area. Premiums will usually increase if you make a claim. You can reduce your premiums by opting for a higher excess.
Excess
The excess is a one-off payment that customers make to their insurance company in the vent of a claim, and reduces monthly/annual premiums. There are two types of excess. Compulsory excess is set by the provider, whereas voluntary excess is set by the policy holder. If, for example, your insurer’s compulsory excess is £200 and you choose a £50 voluntary excess, you will be responsible for the first £250 of any claim you make. This is worth considering in the event of a claim; it is sometimes more cost effective to foot the entire bill yourself instead of making a claim.
Add-ons
When shopping for home insurance, it’s easy to get distracted by policy options. While it’s important to ensure that you the coverage you choose is relevant and appropriate, it is also crucial not to take out insurance add-ons you don’t need. Add-ons can include things like accidental damage, personal money cover, and legal expenses.
High-risk item
Certain items, like high-value jewellery, art and antiques, can result in large insurance claims if they are stolen, lost or damaged. If you want to make sure your coverage is appropriate for these high-risk items (also known as named items), it’s best to contact your insurance company or broker to add them. Note that some plans won’t cover you for high-risk items unless they are specifically listed in your policy.
New for old
Home insurance policies typically offer replacement-cost coverage, which pays for replacing items with new items of comparable quality. If your TV is stolen, for example, you’ll get a new one to replace it. This means that wear and tear will not be taken into account when assessing the value of your belongings. Check your policy to make sure it offers new for old.
No claims discount
Some insurers will offer a discount on your premiums if you don’t make a claim. This discount will build each year, although varies from insurer to insurer.
Rebuild cost
The estimated cost to rebuild your home after a major event. This amount is different to market value in that it only takes into consideration labour and materials, preventing you from overpaying on your premiums.
