Home insurance, what’s insured and what is not?
What is your most precious possession? Depending on your definition of possession you might have answered your family, your wife, your children, your house, your car or your motorbike. Protecting what you treasure is part of human instinct. We don’t need to tell you to take care of your family but you might be failing to protect your most precious material asset, your home.
But I have insurance I hear you complain. Is your insurance suitable? Do you understand what it covers and what it doesn’t? What are your deductibles and your coverage limits? Understanding these and other factors of your insurance can mean the difference between a bad day and a financial ruin. If you have suitable insurance you can bounce right back from an unforeseen occurrence that affects your home, without it you could end destitute and with a massive mortgage to pay and nothing to show for it.
So what does your home insurance likely cover? And what doesn’t it?
1) Damage to your home by fire, lightning, theft, water and snow. These are the basics but can vary depending on where you live and your personal choice. In Nicaragua for example insurance often covers for earthquakes, volcanoes and hurricanes, but there is little need for coverage for damage from snow. Don’t assume your insurance is coverage for your area. Often “basic” insurance templates are sold with little attention to the personal needs of the policy holder.
In most insurances there is no coverage for earthquakes, acts of war and terrorism and floods. If you feel you might be at risk from these or other disasters plan ahead and get them included in your home insurance policy.
2) Your home insurance will likely cover damage and loss of your home contents, like furniture, electrical goods, etc… Please note that it will not cover luxury items or high cost goods like diamond rings, sport cars or property from your work or belonging to some0ne else. If you own expensive goods that stay in your house it is worth getting specific insurance for these items. These specific insurance policies are called floaters and are add-ons to your main house insurance.
3) You are also liable for any damage incurred by people while in your house. Even thieves that enter your property are able to sue you for negligence so it is worth making sure you are insured for injury liability. However even though most house insurance policies include some injury liability coverage it is rarely enough. If you feel that this or any other aspect of your insurance needs a special boost don’t think twice and get an umbrella insurance to raise your insurance limits.
Home insurance and deductibles, what you need to know.
Buying a home is such an outstanding purchase for most of us that it will often take us up to thirty years to pay. It is strange but when you start spending that kind of money it can begin to lose it’s value. We can easily start saying, well what the heck! Spending a little more won’t make a difference. Bank managers and salespeople know this. Which is why they try to sell you all kinds of insurance products at the time of purchase. When I bought my first house the manager pretty much told me that if I didn’t take on this life insurance he was selling me he wouldn’t approve my mortgage. I was twenty one, only six months in my current job and with no credit history, so I bought the life insurance, got my mortgage approved and cancelled the insurance a month later.
Banks and finance advisers will sell you no end of insurance products, mortgage insurance, life insurance, medical insurance and of course home insurance. How can you know what to buy and how much to spend on insurance? It is a safe choice to spend a substantial amount on house insurance. It is after all your largest asset you need to protect it. The only problem is that home insurance is very expensive, how can you make substantial savings on your home insurance. A great way of reducing the premium on your home insurance is taking on well chosen deductibles on your home insurance.
What are home insurance deductibles? As you probably guessed, deductibles deduct a certain amount off any home insurance. This is how they work. When you agree to have a deductible on a certain coverage you agree to pay the firs xyz dollars of any claim. For example if your house gets burnt down and you have a thousand dollar deductible, you will pay for the first 1,000 dollars in damages. Deductibles are very popular with insurance companies for two good reasons. One, when clients have to pay the first xyz amount on a claim it is very good incentive to not bother presenting the claim to start with. Two, the insurance company has to actually spend less on you as a client than if you didn’t have the deductible. For this reason insurance companies are happy to provide savings if you agree to medium to high deductibles.
The key to smart investment in home insurance deductibles is to get them in areas of coverage that are already somewhat covered by another insurance or protection. Often we have insurances we don’t even think about, like those inclued in credit cards, auto loans and umbrella insurances. Umbrella insurances provide coverage for when the coverage of the insurance company is not sufficient. If you are already covered in a certain area of coverage you can choose a very high deductible that will bring down your house insurance premium.