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Should you save by ditching your contents insurance?

Posted 01 February 2016

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It might be tempting to ditch your contents insurance to save some money, but is it a good idea?

If you’ve been thinking about ditching your contents insurance to save money, think again! It could lead to a whole heap of debt if anything happens and you’re not covered. And the recent flooding in the UK, which resulted in personal possessions being piled up in a soggy mess on the footpath, show very graphically why it’s so important to have your personal possessions covered.   

We understand that it may be tempting to think about not renewing your contents insurance, especially if you’ve been buying it for years and you’ve never had to use it. Or if you’re starting to struggle with your budget each month, cutting out that premium might add a vital £20 or so to your weekly shopping budget. But, is it really a good idea? How would you pay to replace your things if something happened to damage them?

This blog will look at the reasons why you really should make sure your contents are covered and what you can do to bring the cost down, as much as possible.

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What is contents insurance and who needs it?

First, let’s have a look at what contents insurance is and who needs it. Contents insurance does exactly what its name suggests – it covers you for loss or damage to the contents of your home. So, the reality is, everyone needs it. And that includes people who are struggling to meet their monthly payments and maybe thinking of entering into a debt solution.

It’s sometimes sold as part of a buildings insurance policy, which you’d be required to have by your mortgage provider if you owned your home, as this part of the policy covers damage to the structure of your home. But it can also be bought by itself, for those who are only renting.

What about contents insurance if I’m on a debt solution?

If you’re struggling to cope each month and you’re thinking of using a debt solution to help you get your unmanageable debts under control, you might be wondering what happens to your insurances. Don’t worry, if you have a buildings and contents, or just contents insurance policy, or a life insurance policy for that matter, not only will you be able to keep it, you’ll be encouraged to do so. As, should the worst happen, not having that security in place is almost certainly going to leave you struggling more than you were before.

However, the insurance premium needs to be a reasonable amount. What counts as reasonable will depend on your personal circumstances so it makes sense to chat this through with your debt advisor, just to be sure. 

What’s covered by contents insurance?

Your contents insurance will cover all the personal belongings you have in your home, whether the building is owned by you or it’s a rented property. It will not cover any property owned by your landlord, they’ll have to get their own insurance policy to cover those items.

So, essentially, anything you own, that’s not attached to the building physically, will be included in your contents policy, including:

·         clothing – everything you have in your wardrobe, plus coats and shoes

·         electrical goods – so your laptop, PC, tablets, mobile phones, games consoles, cameras and so on  

·         jewellery – necklaces, rings, bracelets, earring, pendants, anything you have in your jewellery box counts

·         furniture – from your sofa to your beds and everything in between is covered

·         flooring – this can include carpets, wooden floors, lino or any other kind of floor covering you have

So that’s pretty much everything in your home.

High value items

Do you have any high value items in your home, worth over £1,500? Anything up to this amount is usually automatically covered (check your policy details for any limits), but items over that amount may need to be declared separately. If you have high value items, it’s always best to ask your insurer if they’re covered on the policy or not. You may also be asked to provide proof of the value of these items.

What does a contents insurance policy generally cover me against?

Contents policies usually cover you on a new for old basis against fire, theft and flood. This means exactly what it sounds like – anything that’s gets damaged in a fire or flood or anything that gets stolen will be replaced brand new.

But, there are other options you may like to add on to your policy. One of these options is ‘accidental damage cover’. This is for when one of your little darlings decides to spill blackcurrant juice all over the brand new laptop, or your mate burns a hole in your newly fitted carpet when they come over for a Friday night takeaway. Now, we’re not saying that your policy would pay out in both these circumstances, but that’s the kind of thing they’re designed for.

You could also add on ‘personal possessions’ cover. This means that some items are also covered if you choose to take them out of the house with you, like your laptop for example. And some policies go even further and cover you for damage or loss to some items when you take them overseas too.    

What's ’s not ncluded in contents cover?

There are some things that will not be covered by contents insurance. These are:

·         general wear and tear

·         damage to personal computing devices that’s been caused by a virus

So, if you fancy a new sofa because yours is a looking a bit worse-for-wear from all the love your cat give it with her claws, that’ll not be covered.

However, policies can vary widely, so we’d always advise that you read through the terms and conditions of yours in detail, so that you are aware of what’s included and what’s excluded from it.

Am I obliged to get contents insurance?

No, neither your mortgage provider, nor your landlord or letting agent can force you to get contents insurance. If you live in a rented property and it’s partly or fully furnished, those items should be insured by the landlord, as it’s his property. They may advise you to get some, but they can’t force you. The building will already be covered by the buildings insurance, which your mortgage provider will insist that you have. And your landlord will be required to have buildings insurance for his property by law. So it’s your choice whether you choose to insure your contents or not – but we’d urge you to do so. 

I’ve never claimed, so why do I need to keep buying contents cover?

We know it may seem annoying having to shell out every month for something you haven’t used. But, think about all the things we’ve given as examples in the list above. How do you think you’d pay to replace all those if you had a fire, for example? Unless you have a few thousand quid stashed away for that very eventuality, it’s likely that you’d be in a right old mess, if you didn’t have insurance to start replacing what you’ve lost.

Remember, a fire might mean that, as well as your furniture and carpets being ruined, all your clothes, bed sheets, and towels and so on are gone too. You could be left with nothing, literally, and you’d have to find the money to replace all that stuff.  Or it could be less dramatic.  A fire on your stove could leave you needing to buy a new cooker – but could you afford to do so?

Couldn’t I just save the money I pay each month for insurance and use that if anything goes wrong?

Yes, you could, but what you’re able to save will probably not cover the amount you’d need to replace all your items if you were to have a fire. This is because, according to the Money Advice Service, the average home contents is worth £45,000. And the average home contents insurance policy costs £109 a year. So if you were to try and save £45,000, it’d take you roughly 412 years. Yes, that’s right 412 years! So most contents policies represent very good value for money.

Of course, if you claim, you will be subject to higher premiums the next time around. But if you lost all your belongings in a fire or a flood, an increase in premiums is a small price to pay for their replacement. So, if you want to get back a similar lifestyle to what you had before the disaster happened, you really should get yourself some contents insurance. If you don’t, and you don’t have the money to replace what you’ve lost, you will probably regret it.   

Right, we’ve established that having contents insurance is a good idea, we need to look at how you can avoid paying too much, or too little, for your premium, while still getting the cover you need. That’s tomorrow’s blog.

If you’re thinking about not getting contents insurance because you’re struggling with your finances each month, it may be time to start talking your situation through with a trained debt advisor. They’ll be able to help you find a more workable way to deal with what you owe. You can speak to one of our advisors by clicking the ‘contact us’ link on the left of the page.     

by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.