Home insurance provides indemnity against loss or damage to the buildings and/or the contents of your home and your legal liability to third parties arising from your home ownership or personal liability.
There is also optional cover for:
Other options are also offered; if you are interested ask your insurer or insurance intermediary about them.
You may choose to insure buildings or contents only, or both. You may also choose to buy further optional covers available as shown above. These often vary from one insurer to another.
You can legally own a home without a home insurance. But, if you buy your home and finance the purchase with a home loan, your lender will most likely require you to get home insurance cover. That is because lenders need to protect their investment in your home in case it burns down or is badly damaged by a disaster.
After your home loan is paid off, no one will force you to buy home insurance. But it does not make sense to cancel your policy and risk losing what you have invested in your home.
Normally, the policy would cover any loss or damage caused by:
Check your insurance policy for the "perils" or "risks" covered as these may vary slightly from one insurer to another.
The cover for certain risks such as theft or water damage is suspended if the building is left unoccupied for more than a specified period of time. Ask your insurer for exact details.
The sum insured is the total amount of money for which you are covered. It is the maximum amount your insurers will pay for all the claims arising out of one occurrence such as a fire or an explosion. It is very important that this sum is sufficient because if you are under-insured, claim payments will be reduced by applying what insurers call average where your claim will be reduced in proportion to the level of under-insurance. Therefore if the sum insured is only 80% of the total cost, you will only be paid 80% of the claim. You will have to bear the balance of the loss yourself.
Under the "buildings" section, you are insuring the actual structure of your home and this includes garages, any outbuildings, greenhouses, patios, terraces, swimming pools, driveways, walls, gates and hedges. It also includes fixtures and fittings which are all those things you would not take with you if you moved, such as bathroom, fittings, doors, windows, tiling, air-conditioners and generally speaking kitchens, although these may sometimes be included with contents.
Therefore, in calculating the value, you must cover the cost of rebuilding your home at current construction costs. The value of the land must not be included and you should not take the price you paid for your home or the current market value you expect if you were to sell it. Don't forget to add costs for removal of debris and professional fees such as for architects for re-building your property.
Under the "contents" section, you are insuring all the items in your home such as furniture, household appliances, carpets, linen, radios, videos, hi-fi equipment, cameras, home computers, sports equipment, cameras, jewellery, furs, clothing, personal money and other valuables. You can even extend to insure food in your freezer.
There are specific items that cannot be included such as, amongst others, motor vehicles, boats, trees, bushes and plants and property used for business purposes. The policy will list these items. Check it carefully.
This contents section is generally covered by insurers on a New for Old basis and you must therefore calculate a sum insured that will provide you with enough money in the event of loss or damage to replace all the contents of your home as new. The insurer will pay you the full cost of repairing damaged articles or the cost of replacing them with equivalent new articles if they are stolen or destroyed.
If the cover is on an indemnity basis a deduction will be made from your claim payment to account for wear, tear and depreciation.
Certain items under contents, such as works of art, jewellery or other valuables, may be subject to a limit. This is usually expressed as a proportion or percentage of the total sum insured under household contents. You may find these limits too low for your particular needs and your insurer may agree to raise the normal limits. In certain instances you will be required to get the item appraised and to present the valuation to the insurer. Always read your policy carefully and look for the section about claims settlement basis. Enquire what happens if you do not wish to rebuild the property or to replace any particular item as practices may vary between one insurer and another. Remember that buildings, contents and certain other sections of the home policy may be subject to an excess which is the part of the loss you will pay yourself. Make sure you know what excesses apply.
Would you be able to remember all the possessions you have accumulated over the years if they were destroyed by a fire? Having an up-to-date home inventory will help you get your insurance claim settled faster and help you purchase the correct amount of insurance.
Go through your home, from room to room and make a list of your possessions, describing each item and noting where you bought it and its make and model. Clip to your list any sales receipts, purchase contracts, and appraisals you have. For clothing, count the items you own by category -- coats, shoes, for example -- making notes about those that are especially valuable (but not necessarily sentimental). For major appliances and electronic equipment, record their serial numbers usually found on the back or bottom.
Some insurers may also give you a chart on which you can record your possessions. Ask for a specimen chart when you next renew your policy.
Do not be put off! If you are just setting up a household, starting an inventory list can be relatively simple. However, if you have been living in the same house for many years the task of creating a list can be daunting. Still, it's better to have an incomplete inventory than nothing at all. Start with recent purchases and then try to remember what you can about older possessions. Here are some suggestions:
1. Valuable items
Valuable items like jewellery, art work and collectibles may have increased in value since you purchased them. Check with your agent to make sure that you have adequate insurance for these items. They may need to be insured separately and you may need to have an up-to-date valuation done.
2. Take a picture
Besides the list, you can take pictures of rooms and of important individual items. On the back of the photos, note what is shown and where you bought it or the make and date. Do not forget things that are in closets or drawers.
3. Use a personal computer
Use your PC to make your inventory list. Personal finance software packages often include a homeowners room-by-room inventory program. But remember to keep the inventory as a hard copy as well in case the PC itself is stolen or damaged.
4. Storing the list, photos and tapes
Regardless of how you do it (written list, floppy disk or cd-rom, photos, videotape or audio tape), keep your inventory along with receipts in a safe deposit box or at a friend's or relative's home. That way you'll be sure to have something to give your insurance representative if your home is damaged. When you make a significant purchase, add the information to your inventory while the details are fresh in your mind.
This section covers you and your family members against legal liabilities, as an owner, tenant or occupier of a home, that arise if an accident causes bodily injury or property damage to a third party. This cover applies in and around your home and is subject to a limit.
"All Risks" cover means that you will be covered if any personal possession is accidentally lost, damaged or stolen while they are in your home or whilst they are temporarily removed elsewhere, but within the territory where the insured home is located. Some insurers may extend cover to other countries as well.
Personal possessions that may be insured in this manner include photographic equipment, musical equipment, sports equipment, watches, jewellery, paintings, stamp or coin collections, etc. Look for the definition of personal possessions in the policy to help guide you.
An All Risks cover is cover against accidental damage. Therefore a painting would be covered under your basic contents cover if it is damaged or destroyed by a fire or a flood or any other peril listed in the policy. However under All Risks the painting will also be covered if it is accidentally damaged, say by spilling something over it. The cover will be subject to a list of exclusions. Check the exclusion list under this section to make sure you understand what is covered.
The items insured under this section above a certain value will be identified on your policy schedule together with the sum insured for each item.
This cover provides you with benefits if you suffer an accident anywhere in the country where the property is located. The policy will normally pay:
A lump sum if the accident leads to:
Or weekly benefits if the accident leads to:
In addition there may be a sum to cover medical expenses following an accident.
These benefits will supplement any social insurance benefits you receive, which are subject to limitations.
This is a very important feature of a standard homeowners insurance policy. This pays the additional costs of temporarily living away from your home if you cannot live in it due to a fire or other insured disaster. It covers the costs of a reasonable alternative accommodation while your home is being rebuilt.
Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 10% of the insurance on your building.
You should talk to your insurance representative to make sure you know exactly how much coverage you have and how long the coverage will be in effect. You may be able to increase this coverage for an additional premium.
Some insurers offer discounts for improved security by means of an intruder alarm. In addition they may offer a further discount if you have any additional insurance covers with the same insurer.
There are four events that should trigger a review of your policy:
1. When your policy comes up for renewal
Do not just automatically send a cheque to your insurance company. Take the time to review your coverage and call your insurance representative with any questions or concerns that you may have regarding your homeowners insurance. Ask yourself the following questions:
- Has the company made any changes in coverage since last year?
- Does my policy now include a separate excess for particular risks?
- Can I raise the excess to save money?
- Am I taking advantage of all available discounts?
- Do I need to raise the amount of coverage for personal possessions or the structure?
- Are there other policies on the market which offer cheaper rates - and perhaps offer a better deal?
2. Major purchases or alterations/improvements to your home
If you have made any major purchases, make sure that you have the proper coverage. And do not forget about gifts. If you have received a diamond engagement ring or if a member of your family has bought you expensive artwork or a computer, talk to your insurance representative about increasing the amount of insurance cover you have for your personal possessions.
If you have made major improvements to your home, such as adding a new room, or expanding a kitchen or bathroom, you risk being underinsured if you do not report the increase to your insurance representative. Do not forget about new structures outside of your home. If you have built a room for a washroom or as a tool-shed you need to speak to your insurance representative. Keep receipts and records in case you need to forward copies to your company.
3. You have made your home safer
If you have installed a fire/burglar alarm system or taken any other enhanced security measures, make sure that your insurance representative knows about these improvements. You may qualify for a discount.
4. Major lifestyle changes
Marriage, separation, or adult children who move back into the family home, can all affect your homeowners insurance. When people move in or move out, they take their belongings with them. And you may need additional coverage if there is a sizeable increase in the value of the belongings in your home.
Home insurance cover can vary from one company to another, so it pays to obtain quotations before you buy. While this list isn't meant to be exhaustive, it should start you off on the right track.
In many cases, a home insurance policy would only cover you if there is forcible and violent entry into your home. This means that if a burglar breaks into your house with ease (such as with your keys, or through a window left ajar), your insurance will not cover you for burgled items (described as "walk-in" theft).
Burglars would not find your home an "easy mark' if they are forced to work in the light, if they have to take a lot of time breaking in, or if they cannot break in without making a lot of noise.
Research shows that if it takes more than four or five minutes to break into a home, the burglar will go elsewhere.
Some insurance companies provide discounts for devices that make a home safer -- dead-bolt locks, window gratings, bars and smoke/fire/burglar alarms.
When improving the security of your home, do not exchange security for personal safety. Do not make your home such a fortress that you are unable to escape in case of a fire or other emergency.
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