Glossary · UK
What is Contents Insurance?
Insurance covering the belongings inside a home, such as furniture, electronics and personal items, against loss or damage from events like fire, flood or theft.
Full Definition
Contents insurance covers the belongings kept inside a home -- furniture, electronics, clothing, jewellery, and other personal possessions -- against loss, theft or damage caused by insured events such as fire, flood, storm damage, and burglary, generally up to a total "sum insured" the policyholder sets when taking out the policy, which should reflect the realistic replacement cost of everything they own. Unlike buildings insurance, contents insurance is not a legal requirement and mortgage lenders do not typically insist on it, since the lender's financial interest is in the physical property, not the policyholder's personal belongings, so the decision to take out contents cover, and at what level, is entirely up to the homeowner or tenant. Most contents policies can be bought on either a "new for old" basis, which pays out the cost of replacing an item with an equivalent new one regardless of its age or condition, or on an "indemnity" basis, which pays out the item's current second-hand value after deducting for wear and tear, with new-for-old cover generally more expensive but providing a materially better payout for older items. Higher-value single items such as expensive jewellery, bicycles or specialist equipment often need to be individually listed and separately insured under a "high-value items" or "specified items" section, since standard contents policies typically cap the payout for any single item, and cover for possessions taken outside the home (such as a laptop or phone) usually requires an additional "accidental damage" or "away from home" extension rather than being included as standard. Renters as well as homeowners can and generally should take out contents insurance, since a landlord's buildings insurance policy does not cover a tenant's own belongings.