Do I need buildings insurance, contents insurance or both?

Buildings insurance covers the physical structure — walls, roof, floors, windows and doors — plus permanent fixtures such as a fitted kitchen, bathroom suite and built-in wardrobes. Many policies also cover outbuildings, walls, fences and driveways. It typically protects against risks such as fire, flood, storm, escape of water, subsidence and theft-related damage.

Contents insurance covers the things you'd take with you if you moved: furniture, electrical items, clothes, jewellery and other belongings. A simple test is to imagine turning your home upside down — anything that would fall out is contents.

Your situation decides which cover is relevant to you:

• Homeowners with a mortgage: buildings cover is usually a condition of the mortgage, and buyers are commonly responsible for insuring from exchange of contracts. Contents cover is optional.
• Homeowners without a mortgage: neither is a legal requirement, but buildings cover protects what is usually your largest asset.
• Leaseholders in flats: buildings insurance is usually arranged by the freeholder or managing agent and paid for through the service charge, so you may only need contents cover. Check your lease.
• Tenants: the landlord is responsible for insuring the building. Their policy won't cover your belongings, so contents cover is the one to consider.
• Landlords: a standard home policy usually isn't suitable for a let property, so landlord insurance is normally needed.

The buildings sum insured should be based on the cost of rebuilding your home from scratch, including demolition, clearing the site and professional fees. This is often quite different from the market value, because market value includes the land and reflects local demand rather than construction costs.

You can find a rebuild cost on some mortgage valuation reports or use the free BCIS rebuild cost calculator from the Royal Institution of Chartered Surveyors. Some insurers don't ask for a figure at all and instead offer cover up to a high fixed limit. If your sum insured is too low, an insurer may reduce a claim in proportion to the shortfall.

Contents cover is usually on a new-for-old basis, so the value should be what it would cost to replace everything at today's prices. Going room by room, including the loft, shed and garage, gives a more realistic total than a rough guess.

Most policies have a single-item limit and a total limit for valuables. Items such as engagement rings, watches, bikes or expensive cameras may need to be listed individually. Cover for belongings outside the home, sometimes called personal possessions cover, is often an optional extra.

A combined policy covers buildings and contents together, with one renewal date and one insurer to deal with if a claim involves both, such as a burst pipe that damages the ceiling and the sofa beneath it. Buying them separately lets you choose different insurers for each, which can suit you if one insurer is better for buildings and another for contents.

Whichever you choose, check whether accidental damage is included, what the excess is for each type of claim, and the rules on leaving your home unoccupied. If your home is at high flood risk, the Flood Re scheme helps many insurers offer cover for older homes.