Home insurance is one of those non-negotiable things in life. If you have a mortgage you will be obliged to take it out and if you are renting or own your own home outright you’d be a fool not to be insured. However, many people struggle with this type of insurance as they don’t know exactly what is available, or what they should cover. Indeed, some types of home insurance also offer cover outside the home. Here we are going to take a look at what you should know about home insurance.
Building or contents insurance?
The first step is to understand what needs ensuring, as there are two different types of home insurance on the market. Building insurance is vital if you have a mortgage or own your own home as this will cover the actual structure of your property against damage from the elements, subsidence, or generally any other defect whatever the cause. Contents insurance does what it says, it will cover you for your possessions in the home.
How much cover do I need?
Again, this will depend on the type of insurance. For building insurance, you do not need to be covered to the value of your house as this will include the land value, you just need to make sure you are covered for the rebuild cost. On the contents side, you should go through your possessions and then tally up their value. If you have high-value items it might be worthwhile listing these individually in your policy so that they have a clearly defined value, rather than just coming under general contents. Try not to over or underestimate as your premiums will be based on the value you give your insurers.
Do I need cover outside the home?
Obviously some of the contents of your home, such as bicycles or laptop computers, will be used outside of your house so you may want to consider extra insurance to cover damage or loss to these. Some policies offer this as standard so you need to check beforehand if these options are available as it can be much better value for money to tie this insurance up with your general contents insurance, rather than opening another policy. You should also double-check the situation if you keep garden tools in a shed, or if your laptop is covered if you take it on holiday as you want to be covered for all eventualities.
What is the excess?
This is an important point to consider especially when it comes to lower-level claims. Generally, when you make a claim there will be an excess value over which they will pay out. If this is set too high, for example at $250 and you want to claim for a water damaged rug, then there will be no value in making the claim. You can lower the amount to $50 or even zero, but remember this will affect the premium you will pay so make sure you do a cost/benefit analysis first.
New for old cover?
This is a very important consideration, and although it will increase your premium, new for old cover is often advisable. Basically it means that if you claim for a five-year-old laptop then rather than getting the value of a five-year-old laptop they would pay you for the equivalent of a brand new laptop today. This allows you to immediately go out and buy a new laptop rather than being hundreds of dollars out of pocket.
No claims discounts
As with car insurance, it is perfectly possible to build up no claims discounts with your home insurance, but be careful because making a claim will wipe out the savings. If you only want to claim for a single broken window pane, it is probably more cost-efficient to pay for this out of your own pocket to keep future premiums down, whereas if you have an expensive piece of art stolen it is definitely advisable to make the claim, as this is really what you have bought the insurance for.
Choosing a home insurance policy can be a minefield, but if you follow this guide you will be in a much better position to make informed choices. Make sure you understand the difference between home and contents insurance and then ensure that you have the right level of cover for all your possessions. Check whether they are covered outside of the home and how much the excess is if you really need to make a claim, and buy new for old cover so that you will never be left out of pocket and without an important item. Happy insurance shopping!