Home insurance terms – some frequently thought questions

Who are the ABI?

The initials stand for ‘Association of British Insurers’, which is the leading trade association for insurance providers. The ABI promotes industry best practice and highlights consumer and business issues.

What’s the difference between buildings and contents insurance? 

Buildings insurance covers the actual structure of a house, so things like the walls, roof, windows and fixed floors such as laminate and real wood (carpets will typically be covered by contents insurance). It also includes permanent fixtures like the bath, toilet and fitted kitchen. Typically, buildings insurance also covers external buildings on the property like garages, sheds and even greenhouses.

Contents insurance on the other hand, covers the stuff inside the home. We like to use the following analogy; if you took your roof off your house, contents insurance covers everything that would fall out such as clothing, furniture and electricals, it also includes carpets and curtains.

What add-ons can I get on my home insurance?

Additional cover, or add-ons can be bolted onto home insurance policies. These typically cost extra to include on a policy. Extra cover can be added onto separate buildings and contents policies – for example:

• Accidental damage cover
• Home emergency cover
• Personal possessions
• Legal expenses cover

What is accidental damage cover?

There are typically different levels of Accidental Damage cover and some home insurance policies will come with a basic form of Accidental Damage cover as standard. In general, this would include damage to sanitary ware and fixed glass / mirrors for buildings insurance and accidental damage to audio visual equipment with contents insurance.

An extra level of Accidental Damage can be usually be added to a home insurance policy which covers damage to property or belongings caused by an accident. For example if a bottle of red wine spilt onto a cream carpet this damage would be covered under the accidental damage section of the contents insurance.

What is home emergency cover?

It’s a bit obvious really – it’s insurance for emergencies that happen in your home. Bear in mind though ‘emergency’ means just that, so it won’t cover you for general wear and tear for example. An emergency usually classified as your home being unsafe or unsecure, if there is risk to you or your family, or if there is risk of further damage to your home.

Sometimes home emergency cover is included as standard and sometimes it’s an add-on feature that has to be selected.

What is personal possessions cover?

This insures belongings defined as items which are kept on your person or which you take outside your home, such as jewellery, watches, handbags and purses or tech gadgets. 

What is legal expenses cover?  

Legal expenses cover on a home insurance policy covers the cost of seeking legal advice should the policyholder need it. Although it’s often sold alongside home insurance, it doesn’t have to be used for a property related claim. For example, policyholders could claim for legal expenses if they’ve been involved in an accident or dispute. Motoring disputes are generally excluded from home insurance legal expenses cover and would be covered by a motor legal expenses policy.

Solicitor fees can rack up quickly so it’s an option worth serious consideration. Claim limits do apply but these would be highlighted when the policy is taken out.

What is new for old cover? 

This means that, with a few exceptions, any damaged or stolen items claimed for would be replaced with a brand-new item, even if the item damaged or stolen was old. Typically clothing, linen and curtains are excluded and those claims will be paid with a deduction for wear and tear. New for old is now the norm on most home insurance policies, but be sure to check before you purchase.

What is trace and access cover?

This sounds more exciting than it really is, it basically covers the cost of finding the location of a gas or water leak and getting to it. Trace and access is included in some policies but not all, so it’s worth finding out before purchasing a policy because it can be invaluable for sorting out problems that can be very hard and expensive to resolve otherwise.

For example, an insurance policy covers the damage caused by an insured event like ‘escape of water’. If you have underfloor heating and the pipe bursts or splits. Your floor may look fine but feel a bit spongey, you think there might be a leak but you could end up digging up a lot of your floor to locate it. Trace and access would cover the investigation work to find the leak and also the reinstatement of the damage caused. Without the cover in place you would just be insured for the damage caused by the water leak itself.

What is business equipment cover? 

Computers and printers are usually covered under contents insurance; but if a business is run from home, they may not be. It’s always worth checking with individual insurance providers who can offer advice; in some cases, they’ll be able to extend an existing policy to include the equipment. This also extends to things like musical equipment if you are in a band, or sound systems if you’re a DJ for example. If you have items solely used for business purposes do not assume they’re always covered under your home insurance policy, check your T&Cs as limited cover may be offered.

If not, then consider taking out a separate business policy (if you’re employed but work from home, but check whether your employer insures the equipment first.)

What is insurance premium tax or IPT?

This is a tax on many types of insurance policy. At the moment, IPT is levied at 10% but from 1 June 2017 it will increase to 12%.

What is a home insurance excess?

When someone makes a claim, the excess is what they have to pay towards it. The policy excess can be made up of a compulsory excess and voluntary excess.

A compulsory excess is set by the insurance provider and is non-negotiable. A voluntary excess is an amount that the policyholder has agreed to pay towards the claim. Having a higher voluntary excess can help lower the overall premium (but bear in mind, it needs to be paid so make sure it’s affordable). But this may not always be true as how insurance providers price their policies differ hugely. It may be the case that a home insurance provider may consider that policy holders primarily interested in a cheaper premium through increased excess may be an increased risk to insure for example.

What is a loss adjuster?

A loss adjuster is typically appointed by a home insurance provider when there has been a large claim made. They will most likely visit the property and will be responsible for arranging repairs and replacement items where necessary.

Don’t be concerned if a loss adjuster is appointed, this is more than likely just standard procedure as the insurance provider may expect the claim to be large.

Unfortunately due to the nature of large loss claims, such as burglary or fire, they can often be distressing The loss adjuster will probably ask questions about the circumstances of the claim, as part of their job is to assess a claim against a policy, therefore it’s very important they fully understand the circumstances so they can get the home and the policyholder back to normal.

So if a loss adjuster is appointed to a claim, don’t panic, they are there to help you. Take the opportunity to explain the circumstances and ask them any questions you have.

What does sum insured mean?

Your sum insured is usually split between buildings and contents. It reflects the total amount you could claim should you experience a complete loss – for example if your home burns down and you need to completely rebuild your entire property from scratch and replace all of your contents.

Your buildings sum insured should reflect the total rebuild cost of your home. So again if your house was burnt down how much would it cost to build again from scratch. This differs to the market value of your property as the market value will take into consideration things like the location and the value of the land itself the home is sitting on.

Your contents sum insured is the cost of everything in your home classed as content. As we mentioned previously, imagine turning your house upside down, giving it a shake, anything which would fall out would be your contents. This also will generally include your carpets and curtains too.

It’s important not to under estimate the value of either your buildings or contents but it’s also not worth over insuring them either as you will not be able to claim more than the value of your home and contents Try and be as accurate as possible when valuing your possessions.

What does it mean if I’m under-insured?

It means that the sum insured is not high enough to cover the cost of replacing all the things in the property or to rebuild the property itself.

Under-insuring might mean a lower premium but if a policy can’t cover everything it needs to, then it’s a bit of a false economy.

If you have clearly undervalued your buildings or contents for a cheaper premium your insurance provider will typically reduce the claim settlement by a percentage amount to reflect the percentage of the under insured value. For example if your home is underinsured by 20% of its value then the claim will be reduced by 20% of its value.

What is tenants’ insurance?

This is home contents insurance tailored to meet the needs of people who rent their homes. Different options are available to suit self-contained rental properties as well as shared houses, flats and student accommodation.

What is classed as ‘valuables’?

A typical definition of “valuables” is items that are of high value and typically easier to steal. This can include things such as your tech gadgets, jewellery, antiques, artwork and collectibles. Insurance providers ask you to enter these “valuable” items differently in the policy depending on your use of them and their value. Valuable items are typically split in the following areas:

• High risk items

These are valuables that remain within your home but are below the insurance providers’ “single article limit” (as described above). So the total amount you include as a high risk item limit should reflect the overall value of these items.

• Personal Possessions

Very similar to high risk items but here the intention is that you take these items outside the home (see our separate definition above)

• Specified items

These are valuable items which you need to add individually to a policy because they exceed the insurer’s single article limit (SAL). More on this below.

Single article limit (SAL)

This is the maximum amount an individual item can be worth before you need to specify it on the policy (sometimes called single item limit too). This typically only applies to items considered to be a “valuable” (see our guide for a definition). Insurance providers have different limits to when you need to add an item individually to a policy and can be as low as £1,000 and is commonly even lower than that for bicycles which you often need to specify on your policy.

Where can I find more information about home insurance?

Hopefully you’ll now feel like a pro when it comes to deciphering those pesky home insurance terms. But if all of this has just whet your appetite for more information, then visit our hub where you can find all the facts you need to turn you into a home cover guru.