Top 5 Tips When Considering Home Owner’s Insurance

May 7, 2019 3:21 pm Published by Leave your thoughts

If you own a home, or if you are buying one, you really do need to have homeowner’s insurance. It’s not compulsory, but it is essential. Imagine what could happen if you don’t have it and disaster strikes.

There’s no escape from the obvious fact that insurance costs money, and sometimes people make mistakes when they try to cut down the costs of their insurance. They also might choose policies based on cost alone, without taking the other important factors into account.

To help make these important decisions easier, we’ve compiled this list of tips to consider when you are choosing homeowner’s insurance.

1. Avoid being under-insured

Of all the mistakes it’s possible to make, probably the worst is under-insuring. It actually can prove to be a very costly mistake. While you may think that the worst that can happen is that you won’t receive sufficient payment from your insurance claim to cover the costs of what you have lost, that’s actually not the biggest worry you should have.

If an insurer has strong reason to believe you are intentionally under-insuring, they may even cancel your policy. In the worst cases, and particularly if you are a serial offender, you could even get blacklisted. Not having sufficient insurance is bad, but not being able to buy insurance anywhere is terrible.

Of course, the other thing you’ll need to keep in mind is that if you’re under-insured and your home is a total write-off, you won’t be able to replace it. If you only receive 60 percent of the true value, you’ll only be able to replace it with a house that’s 60 percent as good as the original. The estimate you make should be as accurate as you can get it.

Don’t rely on council valuations when making your insurance estimate, because council valuations can be shockingly inaccurate. It’s worth getting a proper valuation from a professional valuer because this is an inexpensive service that will give you a more reliable figure (the valuation should be for the replacement cost of the house, not the land it’s sitting on).

You only need to do this once, then allow a small annual inflation for asset appreciation and currency devaluation, both of which are pretty much inevitable.

2. Remember you’re also insuring the contents of your home

You should make a detailed list of every important thing you will want to replace if an insurable event occurs. Don’t leave anything out, don’t under-value things, and also don’t be tempted to over-value anything.

You should list the name of the item, the year it was purchased or came into your possession (if it’s a very old item, you may want to list it as an antique and state when it was made), the price it was purchased for, and an estimate of its replacement value. Taking photographs of the most important items showing their condition wouldn’t hurt, either.

3. Think about additional insurances you might need

Homeowner’s insurance is very basic. It covers you for most of the more common detrimental occurrences, and it provides you with general replacement amounts. There are certain things it doesn’t cover, however, and you may need additional insurances to “fill the gaps”.

Usually, the extra cover won’t cost you much, and it will give you much greater peace of mind, so it is worth thinking about. Some of the things you might need additional cover for include:

  • High value items like precious artworks, unique jewellery, valuable antiques, and high value livestock might be best covered by individual insurance for the specific items against loss due to any reason.
  • Excluded events may need to be covered separately. These exclusions are usually certain kinds of natural disasters and major catastrophic events.
  • If you’ll be renting the home out to tenants, you should seriously consider getting landlord insurance as well. It will give you additional cover that is not provided by ordinary home owner’s insurance.

4. Watch out for excess

Excess is never good, and that particularly applies to insurance policies. Some insurers offer discounted insurance when an excess is included. This can help to make the policy more affordable for consumers, but the thing to keep in mind is that it’s only affordable before an insurable event occurs. After the insurable event, you’ll have to pay the excess on your claim, and that could be expensive.

5. Don’t base your decision solely on price

Obviously it’s a good idea to be frugal, but cheap prices can sometimes mean corners are being cut. That’s not a good thing in insurance. You’ll want to make sure your insurer is reputable, has a good track record for fairness, and provides acceptable terms and conditions.

The best insurance companies have excellent customer service, explain things with the least complexity, and don’t make headlines for the wrong reasons.

Above all, you should feel that you can trust and rely on your insurer to do the right thing when problems arise. If an insurer can’t promise you anything more than a low price, you may not actually be getting the best deal. Look at the whole picture and make your decision based on all the relevant factors. It may be the best thing for you in the long run.

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This post was written by Technical Underwriting Centre

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