Understanding your home insurance renewal

What a renewal is

Home insurance is usually sold as an annual policy, and the renewal is the point where one policy year ends and the next begins. In the run-up to the renewal date, your insurer normally sends renewal documents setting out the price and the cover for the year ahead.

The renewal is also the moment the policy’s details are restated, which makes it a natural time to check they still describe your home accurately — the figures it was built on may be a year or more old.

Buildings cover and contents cover

Home insurance is really two kinds of cover, sold together or separately. Buildings cover relates to the structure of the home — the walls, the roof, and permanent fixtures such as fitted kitchens and bathrooms. Contents cover relates to what is inside it — furniture, appliances, clothes, and other belongings.

A common way to picture the split: if you could turn the house upside down and shake it, whatever would fall out is contents, and whatever would stay put is buildings.

• Buildings: the structure itself, permanent fixtures and fittings, and often outbuildings such as garages.
• Contents: furniture, electronics, clothing, and belongings — sometimes with separate limits for individual high-value items.
• Tenants usually hold contents cover only, with the building itself insured by the landlord.

Rebuild cost is not market value

Buildings cover is normally based on the rebuild cost — what it would cost to rebuild the home from scratch, including materials, labour, and clearing the site — rather than on what the property would sell for. The two figures measure different things, and neither is reliably higher than the other.

The renewal documents usually show the figure the policy is based on, often called the sum insured. It is worth knowing which figure your policy uses and where it came from — a survey, an estimate made when the policy was first taken out, or a figure carried forward from year to year.

Why cover levels drift out of date

Cover levels are set when a policy first starts and are then carried forward, while the home itself changes. An extension, a loft conversion, a new kitchen, or simply accumulating more belongings can all mean the original figures no longer describe what is actually there.

Rebuild costs also move with the price of materials and labour, so a figure that was right when the policy began may not be right now. Some policies index-link the sum insured so it adjusts each year; others leave it exactly as it was set.

Because the renewal restates these figures, it is a natural point to read them and consider whether they still look like your home.

What the renewal documents usually show

Renewal documents vary in layout, but most cover the same ground: the price for the coming year, the cover the policy provides, and what happens if you do nothing.

The renewal notice sits alongside the fuller policy documents — the schedule and the policy wording — which describe the cover in detail. The notice is the summary; the schedule is the record of what is actually insured.

• The renewal price for the year ahead, and how it compares with what you have been paying.
• The sums insured for buildings and contents, and any separate limits for specific items.
• The excess — the amount you pay yourself towards a claim — which can differ by type of claim.
• Any optional extras on the policy, such as accidental damage or legal expenses cover.
• Whether the policy will renew automatically, and what to do if you do not want it to.

Auto-renewal

Many home insurance policies renew automatically: unless you tell the insurer otherwise before the renewal date, the policy continues for another year at the new price. The renewal documents normally say whether this applies and how to opt out if you would rather decide afresh each year.

Auto-renewal has a purpose in insurance that it does not have in most subscriptions — it stops a home accidentally going uninsured. But it also means the new price and cover take effect without you actively agreeing to them, so the renewal date is worth knowing even if you expect to keep the same policy. Whether to let a policy roll over or to look at it afresh each year is a choice, and it stays with you.

A note on this guide

This guide is general information to help you understand your own contracts. It is not financial advice or a recommendation, and it does not rank or endorse any provider. Every decision about your contracts remains with you. To see how PEAMO surfaces your contracts and renewals, read How PEAMO works.