In many countries, taking up a home insurance policy is required by law. The homeowner either has to take up the policy offered by the housing authorities, or he will have to take up some form of private home insurance. If a private policy has been approved, it is not necessary for the homeowner to sign up for the government home insurance.
The difference between the two is in two areas - pricing and coverage. Usually, the default offered is one that has the minimum coverage. This policy is offered because of the law. Homeowners must have home insurance in order to be able to own a house. So the policy is offered to the masses, which means that it must also be as affordable as possible. For this reason, the price is also at rock bottom. The primary intention here is not to profit from these policies, but to protect the homeowners from loss of shelter in the event of accident.
Contracts offered by private insurance institutions may be considerably more costly than the government's offer. But in return for the high premiums that the command, they offer far better coverage than the default offer. In addition, there is also the flexibility to improve on the coverage. Of course, premiums will increase accordingly.
There are 2 ways to improve coverage for a home insurance policy. A homeowner can either increase the sum assured, or he can add on riders to improve the comprehensiveness of the contract. Riders are additional insurance contracts that can be added on to the original policy. They cannot be bought as standalone policies, and must be attached to a parent contract. When a homeowner add a rider to the contract, he is usually getting the coverage at a discount. Once the parent policy is terminated, the riders will cease to exist as well.
Assessing the coverage of home insurance can be a cumbersome and lengthy process. The contract itself is rather long. That is because it includes all kinds of definitions that restrict the scope of coverage. This will help speed up claims in the event that an accident occurs. The contract will state in a very precise manner, what will and will not be covered. Most homeowners skip the details because they find it too time consuming to go through the contract. But this is an unwise move. When something happens to their home, they later realize that they are in fact not covered by the home insurance that they bought. For example, most contracts do not cover natural disasters such as floods and earth quakes. These are stated in the policy contract.
So before buying home insurance, be sure to take the time to read the fine print. Compare between policies and when in doubt, always contact an advisor for clarification.
With 95% of American homeowners having home insurance (according to the National Association of Insurance Commissioners), it's clear that most of us know how important this type of insurance is. It really is impossible to overestimate the importance of insuring your home and its contents - home insurance should be considered an essential for anyone who owns their own home.
Just as important is understanding the terms of your home insurance policy. If the worst happens, and your home is damaged or destroyed, it would be a complete disaster to find out that your policy does not cover everything you thought it did. As with any other insurance policy, if you're in doubt about anything, don't be afraid to ask as many questions as you need to so that you can fully understand exactly what your policy covers.
Standard Home Insurance Policies
Standard policies cover things like damage due to tornadoes, hurricanes, and other destructive weather, fire and smoke damage, vandalism, and theft. Earthquake and flood damage is not covered. A typical home insurance policy might cover the following:
- Your home, yard (including landscaping and plants), and outbuildings on the property such as a garage, garden shed or pool house. - The contents of your home and outbuildings. This includes possessions borrowed from others, and those belonging to non-paying guests. - Vacant land that you own. - Cemetery plots. - Legal responsibility for unauthorized use of your credit card or checks. - Liability for people injured on your property, including legal and medical expenses. - Costs incurred by your displacement from the home (including rent for temporary housing).
Standard policies may not cover the full value of items such as furs and jewelry, guns, electronic equipment, or antiques. If you own these types of items, check your policy thoroughly - you may need to increase your insurance premium to ensure you are covered for their full value. Even if you don't, it pays to go through your policy annually; to make sure it accurately reflects the value of your home and possessions.
Extra Coverage Policies
Standard home insurance policies don't cover flood and earthquake damage. Instead, these must be paid for separately. These two problems tend to be concentrated in discrete regions of the country; therefore they are not usually part of a typical home insurance policy. If you do happen to live in an area where floods or earthquakes are a possibility, then extra insurance to cover these is essential. The downside, of course, is that this coverage tends to be very expensive - those people who actually need this coverage will pay much more for it than people who don't need it.
Guaranteed Replacement Cost Policies
Guaranteed replacement cost coverage gives you just what the name suggests - if your home or possessions are destroyed, you are guaranteed the cost of replacing them, even if you're underinsured.
In terms of the home itself, this is an advantage because you are covered for the full replacement cost, even if you don't know what the actually costs will be. Guaranteed replacement cost coverage is also a good idea for certain types of possessions, such as electronic equipment. Computers, for example, depreciate very quickly - with a standard insurance policy, you'll most likely end up receiving only a fraction of what such equipment is worth, which won't be enough to cover replacement costs.
Both Gen Wright & Casey Yew are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.