Home Insurance

Why home insurance

Home insurance isn't usually a legal obligation, but it is almost always simple good sense for a homeowner to ensure her property is insured.

If you have a mortgage, you will probably be obliged under its terms to have full home insurance. The reason should be obvious: the bank wants to know that it will not lose its money, even if the house is destroyed.

Subgroups of Home Insurance

Many home insurance policies will also provide some level of cover for possessions within the house. This is an area where you should read your policy with great care, because there is great variation in how much contents cover is provided by home insurers.

Ask your insurer what is the maximum they will pay out for contents cover. Is their maximum enough to cover the cost of your protection? Do they have exemptions and limitations that could affect you? Will they cover your possessions outside the house? This latter is increasingly an option, and it can make sense to bundle cover in this way, but don't count on it.

If you have contents insurance, under what circumstances will your insurer pay out? How great is the amount of any loss they'll expect you to pay? If it's more than a couple of hundred dollars then contents insurance becoemes close to worthless (except for the very rich), because such a large percentage of damage and theft will cost under a thousand dollars. How will making a claim on your contents insurance affect your premiums for overall home insurance?

Market value and replacement value

Be sure that you understand the value your insurer is putting on your house. This will usually come under one of two categories: market value and replacement value.

These give you what they sound like: market value home insurance will pay you the value of your home, if you were to sell it on the open market. Replacement value will pay you the cost of bringing back what you had - that is, it'll pay for rebuilding your home to the state it was in beforehand.

Now, these two values will often be very different. In particular, replacement value can be much higher than market value - if, for instance, the location of your home would maek it hard to rebuild in the same place. So, be sure to get the right one. If you're particularly attached to your home - if, for instance, it is a family home that has been maintained through the generations - then you may well want the more expensive replacemnt value home insurance.

The 'Acts of God' problem

Some homeowners are put off buying adequate home insurance because of what htey read and hear about 'acts of god'. The brief version of this is that if some dreadful calamity hits - earthquake, hurrican, or war. The good news is: it ain't necessarily so. Some insurance policies will exclude Acts of God in general or specific Acts of God, but others will explicitly provide cover for them. Flood insurance, for example, is typically applicable even if a flood is large enough to be counted an act of god.

Choosing home insurance

Possibly the first time somebody will try to bounce you into buying home insurance is when you get your mortgage. Your lender will explain to you all the benefits of home insurance, and tell you that you'd be a fool not to get it. They'd be right. Where they'd go wrong is in suggesting that buying their own home insurance package will be a good deal for you. Almost certainly you can get something better by shopping around.

Being prepared to claim

Let me tell you, in one word, the secret of making a home insurance company take your claims seriously: photographs. If you have valuables in your home, if you have a collection of prized objects, if you have well-maintained furniture: photograph it. Then you can demonstrate to your insurer the nature of what was in your house.

You might want to back up your photographs by making lists. Lists of everything you possess. Make them clear, build them up over time, don't exaggerate, and have them stored in a safe place ready to pass on to your home insurance company whenever you need to make a claim.

Needless to say, photographs won't get you a payout if your valuables aren't insured. You will need make sure your policy is clear on what is covered, including the value of what you own. Declaring all this in advance might raise your premiums slightly, but its worth it to have insurance that works!

With this and all the other advice on the internet, you should be well set to get home insurance that is right for you. Now all that remains is for me to wish you good fortune in your quest for home.