There are two main types of policy:

Type 1: you calculate the replacement value of everything in your home and insure for this amount

Type 2: you buy a ‘bedroom rated’ policy from your insurer. This means that the insurer provides an amount of cover based on the number of bedrooms in your home.

What are the differences?

Differences relate to the replacement value of each item. The most common form will give you a cash payment equal to the price of buying an identical new copy of the item.
Alternatively the insurance company itself will buy and replace the item.

Indemnity Policies are useful for reducing your premium costs if you live in a high risk area where , the insurance company will give you cash equalling what they judge to be the second-hand value of the item.

Differences will also be particular to each policy, for example:

• The amount of the excess the insurance company expects you to pay

• Cover for garden items or items stored in garden sheds

• Cover for bicycles, boats and caravans

• Cover for freezer contents

• Discount for not claiming for a given length of time

• Payment for replacing doors, or door and window locks following a burglary

• What exactly is meant by accidental damage and what it covers – all items or just windows and mirrors

Decide if you want to calculate the value of your possessions yourself or if you will accept a ‘one price fits all’ solution from your insurer. Check the details of policies and see which best suit your circumstances. For example if someone is at home most of the time, you can find policies offering a discount. Certain types of burglar alarms or increased security can also reduce premiums. Consider paying your premium annually to benefit from any discount.

Tax-exempt special savings accounts (TESSA’s) have been discontinued, and the last TESSA’s matured on 5 April 2004. You had six months from the date your TESSA matured (in other words up to 5 October 2004 in the case of the very last TESSA’s) within which to transfer the capital (but not the interest) to a tax-free ISA.