How much home insurance do I need?
The buildings number isn't what your house is worth, the contents number is almost always too low, and the expensive things you own probably aren't covered. What actually goes in each box.
The number in the buildings box is not what your house is worth. It’s what it would cost to knock it down and build it again, and for most homes that’s a good deal less than the price you paid.
People get this wrong in both directions. Some insure for the market value and pay years of premium on cover they can’t use. Others accept whatever the comparison site suggested and find out how low it was at the worst possible moment.
There are two numbers on a home insurance policy and both are worth ten minutes of your attention. Here’s what goes in each.
Buildings: the cost to rebuild, not the cost to buy
Buildings cover pays to repair or rebuild the structure. The land underneath it doesn’t burn down, and land is most of what you paid for in a lot of the country. So the rebuild figure and the market value can be tens of thousands apart, in either direction.
Three ways to find the number:
- The BCIS rebuild cost calculator. The Association of British Insurers points to it, it’s free for a small number of estimates, and it asks for the things that actually matter: floor area, when it was built, what it’s built of, how many storeys.
- Your last survey or valuation. A homebuyer’s report usually states a reinstatement cost. If you bought recently, it’s in the file.
- A surveyor, if the house is listed, thatched, timber-framed, or unusual in any way a calculator can’t handle. Non-standard construction is exactly where the online estimate stops being reliable.
Whatever number you land on, it should include the cost of clearing the site, professional fees, and meeting current building regulations, which are stricter than the ones your house was built to. Most calculators do this. It’s worth checking yours did.
Some insurers now offer “unlimited” or “sum insured guaranteed” buildings cover instead of asking for a figure. If yours does, take it and stop thinking about this.
Contents: everything that would fall out if you turned the house upside down
That’s the standard definition and it’s a useful one, because it catches the things people forget. Carpets and curtains. The contents of the shed and the loft. Clothes. The food in the freezer.
Most people underestimate contents badly, and the reason is that nobody owns their possessions all at once. You bought them over fifteen years. Replacing them happens in a single week.
The estate agent’s shortcut, somewhere around £40,000 for a family home, is a starting point and not an answer. The honest version takes an afternoon: walk each room, list what’s in it, put a replacement price against each line. Not what you paid, and not what it would fetch on eBay. What it would cost to buy new, today.
Many insurers now rate contents by the number of bedrooms rather than asking you for a total. That’s easier, and it’s also a rough average, so if your house holds more than the average three-bedroom house you should say so rather than accept the default.
The bit that catches people: single-item limits
Every contents policy caps what it will pay for any one thing. The cap is usually somewhere between £1,000 and £2,000, depending on the insurer, and it applies no matter how high your overall contents figure is.
So the engagement ring, the laptop, the bike, the camera, the watch that was somebody’s grandfather’s. If any of them is worth more than the cap, the policy pays the cap.
The fix is to specify them individually. That usually costs a few pounds each and is almost always cheaper than raising the whole policy, which is the mistake people make when they discover this. Check the cap in your policy documents before you decide which things need naming.
Two related things worth knowing. Items you take out of the house aren’t covered unless you add personal possessions cover, so the bike, the laptop bag and the ring on your finger are outside the policy the moment you leave. And most insurers want a valuation for anything above a certain value, so the ring needs a piece of paper as well as a line on the schedule.
Accidental damage: the one people skip
It’s usually optional, it usually costs a small amount more, and it’s the cover that pays when nothing has gone wrong in an insurable way. You put a foot through the ceiling in the loft. The TV goes over. Red wine, sofa. A football, a door.
Standard policies cover fire, flood, theft, storm and escape of water. They do not cover you being clumsy, and being clumsy is by some distance the most likely thing to happen.
What happens if you get the numbers wrong
If you’ve under-declared, insurers can scale the payout down in proportion. Insure a house for half what it costs to rebuild, and a claim for a £20,000 kitchen fire can be settled at £10,000. That principle applies to a partial loss, not only to the total loss people imagine, which is what makes it worth getting right.
It’s a good argument for reviewing the figures rather than letting the renewal roll. Building costs have moved, you have bought things, and the number you set when you moved in was an estimate made on a day when you had a hundred other things to do.
The ten-minute version
Rebuild cost from a calculator, not the market value. Contents from a room-by-room list, not a guess. Name anything worth more than the single-item cap. Add accidental damage. Write down what you decided and why, because next August you will not remember.
That last part is the bit that quietly matters. The reason home insurance drifts out of date isn’t that people don’t care. It’s that the reasoning behind the numbers lives nowhere, so every renewal starts from scratch and the path of least resistance is to accept the quote. Keeping the policy, the renewal date and the sums you settled on in one place turns next year’s decision into a five-minute check rather than an afternoon.