Our homes and possessions are precious to us, whether we own or rent our home. By making the choice to insure them with the right insurance product, it can give you peace of mind knowing that the financial burden of replacing your damaged or stolen belongings or repairing your home is reduced.
What is Home Insurance?
Home insurance (also called Homeowners Insurance) is a type of property insurance used to protect your home from damage to your house itself, or to the possessions within the home. Home insurance also provides liability coverage against accidents that may occur in your home or on your property.
Typically, home insurance policies will cover items such as the main dwelling, your garage, outbuildings that can be locked up, home improvements and permanently attached or fixed items to your home (such as a built-in wardrobe or lighting).
Who Needs Home Insurance?
Both homeowners and renters can benefit from home insurance. If you are a homeowner, apart from the financial peace of mind, it may also be a requirement of a lender to have home insurance if you are taking out a mortgage on your home.
For renters, a home insurance policy can insure the contents of your home as well as any liability that might arise from an accident in the home or property.
How Much Coverage Do I Need?
It is important to make sure that you have the right level of coverage for your home, to avoid being underinsured. The goal of buying any home insurance policy is to cover the replacement cost of your home. This means that in the event you that need to make a claim, the sum-insured should always cover the cost of replacing your home.
If you are underinsured, it will mean you will have to pay the difference between your insurance payout and the cost of repairing/replacing your home. This could also mean paying additional out-of-pocket expenses, such as temporary accommodation costs, while your home is being repaired.
Types of Home Insurance Coverage
There are two types of coverage when it comes to home insurance:
- Named Perils – an insurance policy that offers coverage only on a specified list of perils. If it is not listed, then it is not covered. Named perils have two categories: basic and broad.
- Open Perils – an insurance policy that covers all damage, apart from a list of specifically excluded perils.
Named Perils – Basic
- Hail or Windstorm
- Vehicle Collision
- Sinkhole Collapse
Named Perils – Broad
- All basic perils
- Break in/burglary
- Weight of snow and ice
- Falling objects
- Water damage that is accidental
- Frozen plumbing
- Artificially generated electricity
Open Perils (All Risk)
As mentioned earlier, it covers all damage and loss apart from the following excluded perils:
- Power failure
- Ordinance of law
- Intentional acts
- Nuclear hazard
How Are Home Insurance Premiums Calculated?
The way home insurance premiums are calculated depends on the likelihood of you making a claim on your policy in the future. There may be a number of factors taken into account when determining the price of your premium and these include:
- The level of cover you have selected
- Occupants in the home
- The quality of the construction materials
- The location of your house
- When your home was built
- Risk profile of the home and property
How Can I Reduce The Cost of My Premium?
Depending on the insurer, you may be able to reduce the cost of your premium by improving the security and safety of your home. This could include things such as:
- Fire extinguishers
- Security systems
- Fire alarms
You could also negotiate discounts with your insurer, if you are eligible. For example:
- Asking for a discount, if you have a linked policy with them
- Asking for a multi-policy discount. For example, if you have car, home, contents insurance with the same provider
- Discount for being insured with them for a number of years
- Discount for not making any claims in the past
As you can see, home insurance is an important thing for your peace of mind. By selecting the right insurance policy with adequate amount of coverage for your needs, you can manage the risk and avoid the complete loss of your home and belongings.