Money People Online Money People Online

Search MoneyPeopleOnline:

How does home insurance work?

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 2 September 2021

5 min read

How does home insurance work?

Home insurance or buildings and contents insurance is a policy that covers you for loss, theft or the damage of your personal belongings, and damage to your property. There are many different levels and types of home insurance which we’ll explain in this section. 

When you buy a home or a property, it is your responsibility to ensure that you have the proper home insurance to protect it. Your mortgage lender will also require that you have sufficient cover in place as part of their stipulations. 

Failing to have proper home insurance can leave you at risk of serious financial loss in the event of damaged items, theft or loss. 

What is home insurance? 

Home insurance comes in two main forms which are buildings insurance, which is the cover that protects your property (i.e. bricks and mortar). The other type of cover is contents insurance which is a policy that insures your personal belongings against loss, theft or damage. 

It is also possible to get combined buildings and contents insurance with most insurance providers.

Home insurance costs can be very reasonable, and well worth it to avoid bigger expenses if anything were to happen to your home or property.

About buildings insurance 

A buildings insurance policy is specifically to protect your properties structural parts such as the bricks and mortar elements. Buildings insurance will protect your home against damage from Fire, Flood, Storm Damage and more (read more ‘different types of home insurance’). 

About contents insurance 

How does home insurance work? 

A home insurance policy will cover you against financial loss from all sorts of potential events that might happen to your property or your belongings. When you buy home insurance, you will be able to get a quote from multiple insurers to find the most suitable cover to protect your home. 

Building insurance is generally purchased by homeowners (and landlords) to provide cover for them against financial loss from damage, loss and theft. Usually, your mortgage lender will have a requirement for buildings insurance to be in place under its terms & conditions of the loan. This is to make sure that they have financial security that the money they lend is covered in case of serious damage from floods, storms, fire and other potential natural disasters. 

If you rent a home then it is the landlords (property owners) responsibility to insure the building because they own the property. They will usually have a landlords insurance policy in place (to cover the building), and then you (the tenant) can have your own contents cover for your personal belongings. 

Contents insurance is also a good idea for most people living in a property, to make sure that they’re protected against loss or theft. This can also be used to protect your belongings outside of your home and can protect items against accidental damage. There are other potential extras that you can add to your policy such as replace old for new and individual item cover, for high value items. 

You will also have a no-claims bonus on your home insurance cover which works exactly the same as car insurance no-claims bonus. You build up your home insurance no-claims discounts every year that you complete without making any claims. 

What is covered by home insurance? 

Here are some of the main elements of cover that your home insurance policy will protect your for.   

Note: you should always check your policy terms & conditions thoroughly to make sure that you are fully protected and to avoid any nasty surprises. This can be especially important for anyone with a non-standard construction property or where there has been previous repairs (such as subsidence). 

Possible events Buildings insurance Contents insurance 
Property damage YES NO 
Fire and smoke damage YES NO 
Storm damage (e.g. wind and rain) YES NO 
Explosion damage (e.g. gas) YES NO 
Fire and smoke damage YES NO 
Vandalism YES NO 
Damage from leaks YES NO 
Collision damage (e.g. vehicle) YES NO 
Subsidence or heave damage YES NO 
Landslip damage YES NO 
Flood or water damage YES NO 
Damage from burst or frozen pipe YES NO 
Theft of personal belongings NO YES 
Damaged personal possessions NO YES 
Leaking roof or gutter damage NO NO 
Pest damage NO NO 
Wear and tear damage NO NO 
Electrical goods failure NO NO 
Mechanical goods failure NO NO 
Accidental damage to belongings NO OPTIONAL 
Damage of possessions not in the home NO OPTIONAL 
Car theft from the home or drive NO NO 
Travel abroad loss or theft of belongings NO OPTIONAL 

How much are home insurance premiums? 

Home insurance premiums can vary dramatically from one insurance provider to another for the same cover. The cost of your cover is calculated based on a number of different elements, which is the same as most insurance policies. 

Cost of home insurance premiums: 

  • Property type 
  • Year built 
  • No Claims Discount or Bonus 
  • Any repairs or damage (e.g. underpinning) 
  • Policy type (e.g. Buildings, Buildings & Contents or Contents only) 
  • Optional benefits (e.g. accidental damage, travel etc.) 
  • Any high value items (Contents insurance) 

Each insurance provider will offer different levels and types of cover which will suit some people better than others. Home insurance is a highly competitive market and you should shop around to find the right deal for you. 

How to make a claim on your home insurance 

Making a claim on your home insurance is generally fairly simple and most insurance companies will usually have a claims department or team that you will speak to when you contact your insurer. You should check your policy documents or any emails that you got with your policy to find the claims department contact information.  

If your claim is as a result of theft, vandalism, or burglary then you should contact the police immediately. You should at this point be provided with a Crime Reference Number (CRN) which your insurance provider will require to process your claim. 

Alternatively, if there has been a home emergency which makes your property unsafe to be occupied then your insurer will usually provide alternative accommodation. Your insurance provider will also provide a payout to cover the cost of moving back in to your property. 

There are usually a number of recommended trades people that will be used by your insurer for repairs and replacements. It may also be possible for you to use your own trade person if you have someone that you specifically want. You should make sure that you keep a log of any work that is carried out and copies of any receipts for materials. 

Finally, you will need to pay out for the voluntary excess which is usually stated on your home insurance documents. Your excess figure will often vary between £200 and £500, depending on your cover and your insurance provider. This can be paid upfront at the beginning of the claims process and often will be a card payment or bank transfer. 

Where can I buy home insurance? 

There are many different options to look at and consider when thinking about buying home insurance. Some can be confusing and there are more simple options these days through price comparison websites for example. If buying home insurance (contents or buildings cover) online, you should make sure that you check any policy documentation very carefully. 

We’ve teamed up with Payment Shield who are one of the UK’s top insurance services for homeowners around the UK. You can find out more about their 5 Star Defaqto rated home insurance policies by CLICKING HERE for more information and a quote. 

Read more of the latest home insurance news and guides.


Statista – Home insurance: average cost of home insurance (online premium) UK 2022

Association of British Insurers (ABI) – Home contents insurance

Financial Ombudsman Service – Home insurance complaints

Sign up for our newsletter

Sign up today for all the best deals and helpful guides. Take control of your finances the MoneyPeople way!