To understand what each type includes, how they are calculated, and why it’s so important to be aware of them before signing any policy.
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What does building refer to in home insurance?
In home insurance, building refers to the structural components of the property: including walls, ceilings, floors, and fixed water, gas, heating, or electricity installations. In other words, anything that is part of its structure. It also covers the garage, storage room, and any communal areas, provided they are within the insured property.
For example, if a water leak damages your parquet flooring or a short circuit affects the electrical system, these would be covered under the building part of the insurance policy.
What are the contents of a property?
Contents refer to all physical belongings stored in the home that are not permanently fixed to the property. In other words, it includes everything you could take with you when moving house—furniture, appliances, electronic devices, clothing, household items, jewellery, and even artwork, as long as they have been properly declared.
For example, if a fire damages your sofa, TV, or laptop, the insurance will cover the loss as long as you have contents coverage.
What’s the difference between building and contents?
As mentioned earlier, the key difference lies in what each type of coverage protects:
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Building insurance covers the fixed and structural components of the property.
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Contents insurance covers personal belongings and interior furnishings.
Both coverages provide complementary protection, and the best home insurance policies typically include both in a single policy. However, you can choose to insure just one of the two—for instance, if you’re a tenant and the landlord has already insured the building. Additionally, if you’ve rented a property and don’t own any furniture there, you can save money by opting out of contents insurance.
A simple rule to remember: imagine holding the property in the palm of your hand and turning it upside down; anything that doesn’t fall is considered part of the building. Built-in furniture or electrical appliances are considered part of the property’s structure.
How is the contents and building calculated?
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The value of the building is typically calculated based on the number of square metres and the type of property; house or apartment. Estimated reconstruction cost per square metre (excluding land value).
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The value of the contents should be determined based on the possessions within the home. Drawing up a detailed inventory is recommended to avoid undervaluing or over-insuring your personal belongings.
Accurately valuating contents and building alike is the key to ensuring that, in the event a claim is filed, the financial compensation is fair and closely matches the actual damage incurred.
Aesthetic damage refers to damage that affects the original visual appearance of a property and is caused indirectly, whether as a result of an accident or during the repairs made following an accident.
For example, a water leak could damage the paintwork in an adjacent room, even if no direct work was carried out there. Home insurance policies often offer an option to add coverage for such damages in the insured property in the event of damage, for instance, if repairs need to be made in the bathroom and identical tiles are unavailable, all the tiles in that room can be replaced, up to the limit specified in the guarantee.
It’s important to note that, for this coverage to be applicable, there must be a previous aesthetic harmony that can be restored. Otherwise, if a bathroom already has a mix of different tiles from previous repairs, you can’t claim to restore an aesthetic that was changed before the damage occurred.
This is when something is insured for less than its actual value.
In cases of underinsurance, a proportional rule will be applied when settling a claim. This rule shall follow this formula:
Compensation = Insured value x Amount of damages / Value of insured items.
The opposite of underinsurance can also occur: when something is insured for more than its actual value, known as overinsurance. In such cases, the insurer will only compensate up to the actual value of the item, not the insured amount. This is because insurance is meant to compensate for actual losses incurred; it’s not a way for the insured party to make a profit.
Now that you have a clearer understanding of these concepts, you can check out everything our home insurance has to offer here.