What is buildings insurance?
Buildings insurance covers the physical structure of your home and any permanent fixtures. This includes the walls, roof, floors, ceilings, windows, doors, fitted kitchens, built-in wardrobes, bathrooms, and any other parts of the property that are permanently fixed in place. It also typically covers outbuildings such as garages and sheds, boundary walls, fences, gates, driveways, paths, and permanent swimming pools.
The purpose of buildings insurance is to pay for repairs or rebuilding if your property is damaged by an insured event — this could include fire, storm, flood, subsidence, escape of water (such as a burst pipe), theft or attempted theft that causes structural damage, vandalism, falling trees, or impact from vehicles or aircraft.
Buildings insurance pays out based on the rebuild cost of your property, not its market value. The rebuild cost is the amount it would cost to completely rebuild your home from scratch, including materials, labour, demolition and site clearance, and professional fees for architects and surveyors. This figure is often significantly lower than the market value of the property because it does not include the value of the land.
How to calculate rebuild cost
There are several ways to determine the correct rebuild cost for buildings insurance. The Royal Institution of Chartered Surveyors (RICS) provides a Building Cost Information Service calculator that estimates rebuild costs based on your property type, size, and location. Your mortgage lender's surveyor may include a rebuild cost estimate in their valuation report. For more complex or unusual properties, a full reinstatement cost assessment by a chartered surveyor provides the most accurate figure.
Getting the rebuild cost right is important. If you underinsure — setting the rebuild cost too low — your insurer may reduce any claim payout proportionally. If your property would cost £350,000 to rebuild but you have insured it for £250,000, the insurer could reduce your claim by the same proportion (approximately 29%), even for partial claims.
What is contents insurance?
Contents insurance covers your personal belongings and any items in your home that are not permanently fixed to the building. This includes furniture, clothing, electronics (televisions, computers, tablets, gaming consoles), kitchen appliances (fridge, washing machine, microwave), jewellery, watches, artwork, books, toys, sports equipment, and general household items.
Contents insurance pays out if your belongings are damaged, destroyed, or stolen as a result of an insured event. The covered events are broadly similar to buildings insurance — fire, flood, storm, theft, vandalism, and escape of water — though the specifics vary between policies.
Contents insurance typically offers two types of cover: new-for-old (also called replacement as new) and indemnity. New-for-old pays the cost of replacing items with new equivalents, regardless of the age of the original item. Indemnity cover pays out the value of the item at the time of loss, accounting for wear and tear and depreciation. New-for-old provides better protection and is the more common option.
How to value your contents
To set the right contents insurance level, you need to estimate the total replacement cost of all your belongings. The most thorough approach is to go through your home room by room, listing every item and estimating what it would cost to replace. Many people significantly underestimate the value of their contents — the average UK household has contents worth between £35,000 and £55,000.
As with buildings insurance, underinsurance can result in reduced claim payouts. If your contents are worth £50,000 but you have insured them for £30,000, the insurer may apply an averaging clause and reduce any payout proportionally.
Do you need both?
If you are a homeowner, you almost certainly need both buildings and contents insurance. Your mortgage lender will typically require you to have buildings insurance as a condition of your mortgage, and it is prudent to have contents insurance to protect your belongings.
If you are a tenant, you do not need buildings insurance — that is the responsibility of your landlord. However, you should strongly consider contents insurance to protect your personal belongings. Your landlord's insurance will not cover your possessions if they are damaged or stolen.
If you own a leasehold flat, buildings insurance is usually arranged by the freeholder or management company and the cost is included in your service charge. You should check that this is the case and arrange your own contents insurance separately.
Combined home insurance policies
Most insurers offer combined home insurance policies that bundle buildings and contents insurance together. Combined policies are often cheaper than buying two separate policies and are more convenient to manage — one policy, one renewal date, one point of contact for claims. However, it is worth comparing the cost of a combined policy against separate buildings and contents policies from different insurers, as sometimes buying separately can be cheaper.
What is not covered?
Both buildings and contents insurance have exclusions — events and circumstances that are not covered. Common exclusions include general wear and tear, gradual deterioration, mechanical or electrical breakdown (unless you add specific cover), damage caused deliberately by you or a family member, damage caused by poor maintenance, and damage to items that were already in poor condition.
Most standard policies also exclude or limit cover for specific risks such as flooding (if the property is in a high-risk area), subsidence (if there is a history of movement), and certain types of theft (if there were no signs of forced entry). High-value items — typically individual items worth more than £1,000 to £2,000 — may need to be specified separately on the policy to be fully covered.
Optional extras worth considering
Many home insurance policies offer optional add-ons that extend the standard cover. Accidental damage cover pays for unintentional damage to your buildings or contents — for example, putting your foot through the ceiling while in the loft, or spilling red wine on a carpet. Home emergency cover provides access to emergency tradespeople for issues like boiler breakdowns, plumbing leaks, or electrical failures. Legal expenses cover helps with the cost of legal disputes related to your property.
Whether these extras are worth the additional premium depends on your circumstances. Accidental damage cover is particularly popular among families with young children, while home emergency cover provides peace of mind for homeowners without the confidence or contacts to arrange emergency repairs independently.
Getting the right home insurance
The right home insurance depends on your property type, its location, its value, and your personal circumstances. An insurance broker can compare policies across the market and recommend the cover that best suits your needs, often identifying savings that are not available through comparison websites. Nesto matches you with experienced home insurance brokers who can help you find the right protection at the best price. The service is free.