Contents insurance gives protection on your personal possessions. This may be at home, in the car or on the move. It is often combined with Buildings insurance. However this depends on the policy's terms and conditions.

Contents insurance covers both the total loss of your possessions or their damage caused by:

• theft
• fire, flood or smoke damage
• water from burst boilers, tanks or pipes
• accidental damage
• subsidence
• falling branches, trees or aerials.

Although you can cover most of your items under a general policy, expensive items such as jewellery, works of art and antiques may need to be insured separately. This is because most contents policies have a limit to the amount they will pay out for a single item. If you have items that fall into this category, you can name them on the policy and pay a higher premium for their inclusion. Alternatively, consider a specialist insurer for these items.

There are two main types of policy:

• you calculate the replacement value of everything in your home and insure for this amount
• 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.

Other differences relate to the replacement value of each item. The commonest form will give you a cash payment equalling the price of buying an identical new copy of the item. In the second type, the insurance company itself will buy and replace the item. Finally, the insurance company will give you cash equalling what they judge to be the second-hand value of the item. These policies are known as ‘indemnity policies’ and are useful for reducing your premium costs if you live in a high risk area.

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 suits 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 can also reduce premiums. Consider paying your premium annually to benefit from any discount.