While buildings insurance looks after the structure of a home, contents insurance covers everything you own inside, plus what's in your garden, shed and garage as well - except a car or motorcycle, which should have separate insurance.

The cost of cover is worked out according to the replacement value of your possessions.

You should consider useful policy extras like legal cover. As a general rule, a contents and legal insurance policy will provide cover for any disputes or claims arising against your home; including employment, accidental damage, personal injury, death or the sale and supply of goods and services.

If someone makes a claim against you, and you get taken to court as a result, your insurer will pay towards your legal fees up to its cover limit.

If you are looking for cheap contents insurance, which most of us are, then you need to work out how much cover you really need to keep the cost down.

Go around your house or flat and list how much you consider every item is worth.

Contents insurance for tenants is probably easier because you only need to list what is not on the inventory - this belongs to the landlord and is their responsibility to insure.

All you really need to cover on tenants contents insurance is what you brought in to the house and any extras you have purchased since moving in.

Remember some special house contents insurance rules:

  • Collections are valued as separate items, so 100 DVDs count as 100 items not a single item

  • Many insurers want to know extra details about the more expensive items you own - generally those valued at 500 or more, like jewellery, art or antiques.

  • Include garden furniture, tools and items stored outside as well

  • Don't forget the obvious like clothes, carpets, curtains and light fittings

  • Some home contents insurance does not cover electronic downloads like mp3 music so you'll need to check

After making your list, add up all the values to give you a total sum to insure. Make sure it's accurate because the premium you pay and any settlement amount for a claim are based on this figure.

If it's too high, you will pay too much for your cover, while if it's too low, you may not be able to replace everything should the worst happen.