Although it is not a legal necessity in many countries, insurance is nonetheless an important investment for homeowners.
Unfortunately, in this day and age one can never take to many precautions against the threat of burglary and break-ins.
This is part of what home coverage protects against; financial cover is provided by your policy should your house be burgled and your personal belongings stolen.
As well as this, some policies also provide financial cover against damage that is done to the structure of your house by a natural disaster or a burglary. In some cases third party liability is also covered, in the event that someone is injured on your property, and wishes to pursue legal action as a result.
Due to the fact that these policies protect not only your home, but also your personal belongings, depending on what type of policy you obtain, your cover may stretch to your belongings while they are not in the house.
For example, if someone were to break into your car and steal your camera while you are on holiday or vacation, you may be entitled to claim under your policy.
Home Insurance – What is it?
Home insurance is intended to provide financial assistance in the event of your house and its contents being damaged or stolen following a natural disaster or burglary. As one can imagine, the financial bills resulting from such events can be catastrophic, and you can never be sure what is around the next corner.
It is not legally necessary to take out a policy in all countries, but it always makes a good investment. Some eventualities that are covered by most policies are:
- Theft of personal belongings from your house.
- Damage done to the structure of your home from an unforeseen incident, such as a lightning storm.
- Third party liability, which protects you in the event of someone being injured on your property.
- If one of your possessions is stolen from your person while you are away from house, you may be able to claim under your policy.
If you are a homeowner, some mortgage providers insist that you take out a policy. This is to ensure that you are able to cope with the cost of any damage that is done to your house, and it is for this reason that many countries legally require homeowners to obtain a policy. It should be noted however that you are generally not obliged to take out a policy with the mortgage lender; instead you should shop around, and try and find the policy that would be right for you.
As with any such policy, the terms and conditions are crucial, and should be studied carefully before finalising a house agreement. Although theses deals aim to protect you financially from any damage that is done to your house, you generally are only entitled to claim if the cause of the damage was unforeseen. For example, if you live on a flood plain, the insurer will deem it likely that your house will be flooded at some stage, and as such they may refuse to cover you for such an eventuality. It is also important to take good care of your house. For example, if you are away from home during a spell of cold weather and your water pipes freeze and subsequently burst, or your roof starts to leak, most insurers will deem you to be at fault for the incident, and refuse to cover you for it.
Whether you are a homeowner or even a tenant in a rented property, a policy will always be a good investment to protect you from the crippling financial bills that can result from a burglary or natural disaster. A suitable policy is a small price to pay for the guaranteed peace of mind and security of your house in the future.
Home Owners Insurance Involves
Home owners insurance involves buildings cover which is the area that aims to cover the cost of damage to the actual structure and fittings of your home. This is distinguished from contents cover because your property is usually of a much higher value than the contents of your home.
Important! When obtaining buildings cover, it is important to obtain a level of coverage that is sufficient to cover the total rebuilding cost of the property that you live in (effectively a worst case scenario). This should not be confused with the property’s market value; the property rebuilding cost can sometimes vary greatly from the cost of the house if it were put on the market for sale.
Companies should be able to offer you assistance in calculating the rebuilding cost of your home. They may provide a conversion table, which provides you with an estimate and allows you to choose the correct level of coverage.
However, should your property be a listed building or any other type of very valuable property, it is advisable to obtain professional assistance with a rebuilding cost evaluation.
The cover offered by your buildings policy will need to keep up with inflation; therefore most policies are index-linked, meaning that they grow every year. Your policy should still be reviewed every few years, as the cover provided may not be adequate for your current needs, especially given the likelihood of fluctuating house and land prices.
Although the first thought that comes to mind with such policies is contents cover, buildings cover is just as, if not more, important. Mortgage providers often make it a requirement before they issue a mortgage, and aside from this, the cost of house repairs following serious, unexpected damage, can be crippling.
Although your mortgage provider may try to sell you their own buildings policy, you are not legally obliged to purchase your mortgage and buildings cover from the same company. This gives you some flexibility to search the market, and find a competitive rate that is right for you. In any case, ensure that you have obtained suitable cover from the instant that you become responsible for the property (which may be before you even move in).
Home Contents Insurance
This cover is designed to cover almost everything that you own, which is removable from your house. This could include furniture, furnishings, kitchen equipment, other household goods, televisions, computer and audio equipment, videos, clothing, personal items, even frozen food and drinks. Valuable possessions such as jewellery and paintings may also be insured.
Most contents policies will cover loss or damage to your possessions whilst they are in your house. The loss and damage could be caused by incidents such as theft, fire, storms, landslips, or more rare occurrences such as falling trees, explosions, even impact from an aircraft. It is important to check the incidents that are covered by your policy; things such as burst pipes or leaking oil tanks may be deemed to be your fault by the insurer, in that you could possibly have taken some more preventative action.
Liability cover is also provided by many policies. If a third party is on your property, and, for instance trips over your hosepipe and injures themselves, your liability cover will help in the eventuality of the third party making a claim against you.
Accidental damage cover may be provided by some policies; this means that you can claim for damage that is done to your possessions accidentally, regardless of who is at fault for the damage. Bear in mind that this type of cover often only applies to possessions that are inside your house; so if you take your camera out for a day and it gets damaged, it may not be covered by your deal. Valuable items such as works of art, jewellery, antiques or musical instruments may need to be insured with a separate policy. The reason for this is that there is usually a limit applied to the amount that a policy will pay out for a single item.
Important! Your policy should cover a specified replacement value of everything in your house, or an amount of cover based on the number of bedrooms in your house. Note that the evaluation of your possessions will have to be done by you, contrary to the calculation of rebuilding costs (required), which is usually done by the providing company or another third party.
Home Renters Insurance
When renting a property, whether it is furnished or unfurnished, it is always a good idea to take out suitable cover. Whether you have rented a fully furnished or unfurnished property, you will usually be required to pay a cash deposit; this secures your intention to rent the property, and also protects the landlord against damage to their property which may be incurred during your tenancy.
In a fully furnished property, you will not own the posessions, but you will however be responsible for their well-being, and any damage that might be incurred. Should the furniture become the victim of wear and tear, the tenant may not be responsible, but damage that can be attributed to the tenant’s irresponsibility, or that of any visitors, can be charged to you, and deducted from your deposit.
Tenants’ cover protects you from the cost of damage that is done to the flat’s furnishings, accidental or otherwise. Usually, a policy that covers the value of your cash deposit will be satisfactory, but you may wish to obtain further cover for any personal belongings that are kept in the flat (i.e. that belong to you, not the landlord).
In an unfurnished flat, then you are wholly responsible for insuring your own contents. An extended “all-risks” policy can provide cover to your personal possessions that are outside your rented property.
Cover can be obtained for household goods, electrical goods, furniture and money, along with other valuables. Generally, a policy of this nature provides cover for all your personal possessions plus your cash deposit on the property.
Note: Aside from the tenants, landlords must also take on a certain level of responsibility when it comes to letting out their property. They must ensure, as the owner of the property, that they have adequate buildings cover, and also contents cover for any furnishings in the property that belong to them. The deposit made by tenants at the start of a tenancy agreement may not enough to completely cover all of the possible damage that can occur during the tenant’s stay. This cover, together of course with careful referencing and selection of your tenants, could reduce the risks you take on significantly.
Home Warranty Insurance Costs
Many people who shop for a suitable policy treat the cost of it as an afterthought. Although it is a small price to pay for the future security of your house, there are some small steps that can be taken, which may reduce your house premiums:
- If possible, obtain your policy via the Internet. This can save you money as online companies generally have lower administrations costs and overheads.
- Make sure you know exactly what cover you are looking for. Many policies are advertised with many extra frills that may not be necessary, but they do add to the cost of your premiums. Don’t pay for something you don’t need.
- Shop around as many different providers as possible. Some companies may be willing to reduce their premiums if you point out a competitor who offers the same cover at a lower cost.
- Consider installing and maintaining a professionally approved burglar alarm. Ask your insurer what security systems they endorse, and if they reduce the cost of coverage accordingly.
- If possible, join a local neighbourhood watch scheme. This way it will be easier to find trustworthy people to look after your property if you are away for an extended period. Some providers may issue a discount for such customers.
- Ensure that all entrances and exits (including windows) are fitted with secure locks; this minimises the chance of a burglary, and it should be reflected in your resultant premiums.
- If possible, try to obtain other cover (such as your motor cover) from the same company as you obtain your house policy. Many providers reward customer loyalty with premium discounts.
- At the end of each year, review what changes you have made to your property, and the value of your possessions.
Adjust cover for items that tend to depreciate rapidly (e.g. a personal computer), and anything which you no longer own, remove from your policy. Again, make sure you aren’t paying for something that you don’t need.
House Insurance Factors
The cost of home premiums can depend on a number of different factors, and how they apply to your personal circumstances; e.g. the security of the area in which you live, or how conscious you are of home security (i.e. if you have an approved burglar alarm installed). Shown below is a list of the main factors affecting the cost of home premiums:
- The level of cover required by your policy – The value at which you wish to insure your property can make a significant difference to home premiums, as this determines the risk that is being taken on behalf of the insurer.
- The area and size of your home – This is relevant to buildings policies, and is used to calculate the total rebuilding cost of your home. The larger this value, the larger your buildings premiums will be.
- The physical nature of your property – A sturdy home built from bricks, concrete or stone (not wood), with a slate or tile roof will generally lead to lower home premiums. In particularly wet climes, the area of flat roof on your home will also determine the cost of your premiums; it should be as little as possible.
- The area you live in – The crime rate of your area, and hence the likelihood of a burglary will determine the risk the insurers are taking on, and also your home premium costs. The likelihood of natural disasters is also taken into account; e.g. if your property is situated on a flood plain, the risk of a flood is obviously very high, and this is reflected in the cost of your premiums.
- The level of security in your home – If you have an approved security system installed, the insurers will take this into account, and you may qualify for a discount.
- The condition of your home – Namely, electrics, plumbing and heating systems will be evaluated to determine the risk of damage being caused to your home as a result of any of these.
A suitable policy can provide you with peace of mind in the knowledge that your house and its contents are fully covered; you will never have to deal with crippling financial bills as a result of a natural disaster or burglary.