The Importance of Home Insurance
Homes are valuable things. If you’re fortunate enough to own your own, then the chances are that it’s the most valuable single thing you own. Moreover, it’ll contain almost every other valuable thing that you own. Protecting it against fire, burglary, flood damage and other threats is therefore essential. Home insurance offers us a means of doing exactly this.
However cautious we might be, and however heavily we might invest in security devices and fire-safety equipment, we can’t reduce the likelihood of a mishap to zero. With more than a thousand burglaries being committed on the average day in Britain, there’ll always exist the chance of a break-in happening to you – and fire can strike almost anywhere. If you’re unlucky, and uninsured, you might lose everything.
That’s where an insurance company comes in. In exchange for a regular sum, they’ll cover losses you might experience in the event of a problem. The extent of this coverage will vary per the likelihood of a problem, and the sort of policy being taken out. The price of these payments, too, will vary. In taking out a home insurance policy, it’s important that you consider these variables and take out a policy that’s right for you.
Let’s examine how insurance policies might differ from one another, so that you can make the most informed possible decision.
What Sorts of Home Insurance are There?
First, let’s consider the categories of home insurance. If you’re looking at insuring your home, then you’ll be faced with three options. These are:
- Buildings insurance
- Contents Insurance
- Combined Insurance
The definitions of each of these terms might seem self-explanatory, but there’s something of a grey area between the three. Buildings insurance covers the actual bricks, mortar, plumbing and bits of wood that make up your home. Contents insurance covers the possessions that go in it. Combined insurance covers both.
Confusion may arise from the fact that some of the possessions in your home are permanently fixed into place – toilers and baths being a great example. These are usually covered under buildings insurance, but not always. It’s therefore worth reading the exact wording of the policy if you’ve opted for buildings insurance.
These aren’t the only arcane terms you’ll encounter. The rate at which your premium is set can be arrived at in two different ways. There’s a sum-insured policy, which works out how much it would cost to build the home from scratch. Then there’s the bedroom-rated method, which is based on the number of bedrooms in your home. The former method is more specific, but takes more time and effort to arrive at – and so the latter method is often offered as a cost-cutting measure.
Then there’s the difference between new-for-old and indemnity cover. The former works by having the insurer pay the cost of repairing or replacing any loss or damage. The latter works by deducting a pre-determined amount for the damage your item has suffered. So rather than restoring a broken item to its prior glory, the insurer simply pays the difference between the value of your item and the value of a new one.
Indemnity policies tend to be cheaper than new-for-old ones, but if you need to make a claim on something big, it may end up costing you. In deciding between the two, you’ll want to consider the value of the items in your home.
Naturally, your choice of policy should reflect your personal circumstances. Be sure to discuss them with anyone else you might be sharing the home with before proceeding. Your insurer will help you weigh up the options – but remember they’ve a vested interest in stacking the deck in their favour.
What Exceptions Apply?
Of course, insurance policies are long and labyrinthine documents, which contain all manner of caveats to protect the insurer from suffering too much harm. Some of these are of particular import.
A building that has people living in it is protected against crime to a greater degree than one that’s abandoned. A burglar, after all, will be on the lookout for signs that a property is empty. That’s why insurers will often stipulate a given period after which your home is no longer covered. In most cases, this period is around a month. If you’ve planning a long trip away, it might be worth talking to your insurer to see if you’ll still be covered when you get back.
If you’re self-employed and work from home, and your premises burn to the ground, then you might run into difficulties running your business. You might even experience significant losses due to an inability to operate your business. These losses may not be covered by your insurer, so be sure to get them protected through other means.
If you’re letting a person stay in your home for money, then there’s always a chance that they might steal something from you, or damage your property. Since you’ll be giving such a person permission to stay, there won’t be any signs of a break-in – and your insurer therefore might hesitate to pay in the event of an incident. It’s important, therefore, to be especially wary when subletting to strangers – or even apparently trustworthy acquaintances.
The Importance of the Excess
One part of the insurance policy that requires a little bit of explanation is the excess. This is the amount you’ll need to pay in the event of a pay-out. Excesses come in two different varieties: there are compulsory ones, which are set by the insurer, and there are voluntary ones, which you’ll agree to pay yourself. By setting a large excess, you’ll be able to lower your premium – but doing so is risky, so make sure you’re able to afford the excess you set.
As confusing as insurance might be, it’s worth taking the time to work out the details. Doing so could help you to save many thousands of pounds in the long-run, and even a little bit of research can help you to avoid major headaches further down the line.