Household Insurance - Buildings

Your home, whether leasehold flat or freehold house, is almost certainly your most valuable possession. Few of us could face the prospect at having to replace it unaided should it be destroyed by fire. Fortunately, the odds against this occurring are very high, so the costs of insuring against the peril are reasonably low (see page 117).

Most forms of household insurance cover risks of damage to or destruction of the buildings, permanent fixtures and fittings and decorations, and usually extend to include outbuildings such as garages, sheds and greenhouses. Boundary walls, fences, drives and pathways can be included but may be excluded. Policies vary.

The risks covered are usually those of fire, lightning, explosion, earthquake, theft and malicious damage, storm, tempest, flood, escape of water from pipes and cisterns, and subsidence and landslip. All policies cover impact damage caused by road vehicles, horses and cattle, and damage caused by collapse of aerials and things dropped from aircraft; some will cover damage to the building caused by falling trees. It is usual for the policy to cover breakage of fixed glass (windows, doors, etc.) and fixed sanitary ware and bathroom fittings.

Variation in cover

Policies vary greatly in the extent of perils included, and it is important for the terms of the policy to be studied very carefully. Where the standard contract does not offer cover for some hazard you particularly wish to be insured against, you can usually arrange for the necessary addition to be made, for which you would have to pay an additional premium.

The 'excess' clause

Where the insured person agrees to bear the cost of the first £10, £50 or other stipulated value of any damage or loss, the premium will be appropriately lower. A clause in an insurance to this effect is called an 'excess' clause, derived from the fact that it is only the excess of the damage above the agreed amount that is insured. Many standard contracts contain 'excess' clauses for certain perils, especially contracts for car insurance and for personal effects.

• The Indemnity Principle
• Credit Exercises