For the specific distinction between buildings and contents cover, see the Buildings vs Contents Insurance guide. This guide covers home insurance more broadly: what it actually covers, what drives your premium, and the underinsurance trap that can substantially reduce a genuine claim payout without you ever realising it was a risk.
1. What home insurance actually covers
Home insurance is generally sold as two distinct types of cover — buildings insurance (the physical structure: walls, roof, fixed fittings) and contents insurance (your possessions inside the property) — either separately or combined into a single policy. Most standard policies cover damage from events like fire, flood, storm, and escape of water, alongside specific perils like subsidence, though the exact coverage and any exclusions vary genuinely meaningfully between providers and policy tiers, making the policy wording worth actually reading rather than assuming standard coverage applies.
2. The underinsurance trap — the average clause
This is the single most important and most commonly misunderstood mechanism in home insurance. Your buildings sum insured should reflect the genuine cost to rebuild your home from scratch — not its market value, which includes land value and is usually a different, often higher figure. If you set your sum insured too low, many insurers apply "average" — a proportional reduction to any claim payout that reflects how underinsured you were, even on a partial claim that doesn't come close to your full sum insured.
| Figure | Amount |
|---|---|
| Genuine rebuild cost of the property | £280,000 |
| Sum insured on the policy | £200,000 |
| Underinsured by | 28.6% |
| Claim made (partial fire damage) | £50,000 |
| Actual payout under the average clause | £35,714 — a £14,286 shortfall |
The genuinely surprising part of the average clause is that it reduces the payout proportionally on any claim, not just a claim that exhausts the full sum insured. A homeowner underinsured by 28.6% on their full rebuild cost gets exactly that same 28.6% reduction applied to a relatively modest, partial claim — meaning the consequence of underinsurance is felt on day-to-day claims, not just in a total-loss, worst-case scenario.
3. What affects your premium
- Location. Flood risk, crime rates, and local claims history all genuinely affect pricing by area.
- Property type, age, and construction. Non-standard construction (thatched roofs, timber frame) and older properties can attract higher premiums, reflecting genuinely different risk profiles.
- Security measures. Alarms, secure locks, and other security features can reduce your premium, sometimes meaningfully.
- Claims history. Both your own personal claims history and, to some extent, the property's prior claims history can affect pricing.
- Excess level chosen. A higher voluntary excess (the amount you pay before the insurer contributes) generally reduces the premium, trading lower ongoing cost for higher cost at the point of any claim.
It's worth being deliberate about the excess trade-off specifically: choosing a higher voluntary excess to reduce your premium makes sense if you genuinely have the savings to cover that excess comfortably should you need to claim, but it can backfire if a higher excess means you avoid making a legitimate, worthwhile claim simply because the upfront cost feels too steep at the time — defeating much of the point of having the cover in the first place.
4. Buildings insurance and your mortgage
Mortgage lenders require buildings insurance to be in place from the point of exchange of contracts, protecting their security interest in the property — this is a genuine lender requirement, not optional, and most conveyancing processes won't complete without confirmation it's arranged. You're free to choose your own provider rather than necessarily using one recommended by your lender or broker, and it's worth shopping around, since the lender-recommended option isn't always the most competitively priced for genuinely equivalent cover.
5. Common mistakes
- Setting the buildings sum insured to the property's market value rather than rebuild cost. These are genuinely different figures — market value includes land value, which doesn't need rebuilding after a fire or flood.
- Never reviewing the sum insured after renovations or extensions. A larger or improved property has a higher rebuild cost — update your sum insured accordingly, or risk the underinsurance trap above.
- Not reading policy exclusions before a claim is needed. Understanding what isn't covered, before you need to find out the hard way, avoids unwelcome surprises at claim time.
- Choosing purely on lowest premium without checking cover quality. A cheaper policy with a lower sum insured, higher excess, or narrower cover can cost far more at claim time than the premium saving was ever worth.
6. Frequently asked questions
How do I find out the genuine rebuild cost of my property?
A RICS-qualified surveyor can provide a rebuild cost assessment, or many insurers provide an online rebuild cost calculator as part of getting a quote — these are estimates based on property type, size, and construction, and are generally more reliable than guessing from the market value. If you've had significant work done (an extension, a loft conversion), update this figure rather than relying on an outdated assessment from before the work.
Do I need contents insurance if I rent rather than own?
Yes, generally — as a tenant you're not responsible for the building structure (your landlord insures that), but your own possessions inside the property are your responsibility to insure if you want them covered against loss or damage. This is worth arranging separately from any insurance your landlord holds, since landlord insurance typically doesn't cover a tenant's personal belongings.
Does home insurance cover accidental damage?
Not automatically on most standard policies — accidental damage cover (covering things like spilling something on a carpet or accidentally damaging a wall) is often an optional add-on rather than included as standard. Check specifically whether this matters to you and whether it's included or needs adding before assuming your policy covers it.
Is it worth switching home insurance provider every year?
Shopping around at renewal is generally worth doing, since loyalty isn't always rewarded with the most competitive ongoing price in the UK insurance market. That said, switching purely for the lowest headline premium without checking the sum insured and cover quality are genuinely equivalent can leave you with weaker protection than your previous policy — compare like-for-like cover, not just the price, before switching.
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✓ Editorially reviewed — all Poqet guides are checked for factual accuracy before publication and updated when UK rates or legislation change. Editorial Policy