What Disadvantage Is There When Buying Budget Home Insurance?

There's no reason to ignore budget home insurance, the key is to understand what might be missing when compared to full price cover and make sure that the risks that come with it are not great for someone in your situation. Home insurance covers two areas, building insurance, which protects the house itself from damage and contents insurance, which covers your possessions in (and sometimes out of) the home.

With regard to building insurance, the most likely downside of a cheaper policy is that it might not completely cover the cost of completely rebuilding your home. If perhaps your home is in an area that isn't at risk from flooding or subsidence, then it's likely that rebuilding after a fire is the only thing that you wouldn't be completely covered against. If that is an acceptable risk for you, then it will fit your needs.

On the contents side, cheaper insurance will have lower limits for individual items, like hi-fi, computers and televisions, or jewellery. In this case its important to accurately count up the cost of replacing all your possessions, and making sure that the policy will cover everything or most of it.

Some cheaper policies operate on a 'replacement' basis rather than 'as new'. 'Replacement' means that if, for example, your three-year-old computer is stolen, you will be awarded the amount of money to buy a second-hand one, rather than a new one. You will also find higher 'excess' charges with cheaper policies, which is the amount that you have to pay yourself to add to the money that the insurance company gives you. Again the key is to understand what's lacking and make sure it matches with your needs.