Essential Home Insurance Coverage You Need to Have

Should you ever be unfortunate enough to have to make a claim on your home insurance, you do not want to be in the position where you have to cross your fingers and hope that you have been paying for the right kind of coverage. It’s far better to ensure that you have the best kind of cover in place from the start.

home insurance image

Two Primary Things to Cover

Buildings (Dwelling) Insurance

In order to truly determine this number, you need to find out how much it would cost to build your property should it be damaged or destroyed completely. This figure is not the market value of the house; however the figure should reflect other costs such as alternative accommodation (staying in a hotel), site costs, demolition and professional fees.

You should also be honest about the age of the property, its location in relation to waterways and the materials used in its construction for roofs and walls. Check policies for limitations on coverage; for example some policies will pay up to a certain amount for damage which occurs to decor and fittings when attempting to trace and repair the source of a leak, whereas others do not.

Contents (Personal Belongings) Insurance

This portion of your home insurance coverage is for everything in your home that can be picked up and carried away. You need to try and evaluate the costs of these items when determining how much you need to have insured. The premium you pay will depend on whether you opt for a policy which will repair or replace items at their current value or replace them ‘as new’. When making a claim it is important to know what level of coverage you have. For both buildings and contents insurance you can pay an additional premium which covers accidental damage.

If you have any high value items such as jewelry or antiques these should be listed individually on your home insurance. For the purposes of a potential claim you should have receipts, photographs and valuation certificates for these items lodged somewhere safe. Some insurers only give you limited coverage if you take items or money outside the home. Many will not insure you if your home is not occupied for 60 consecutive days.

Making a Claim

If you have been the victim of theft, contact the police and obtain a case number. Next, get in touch with the insurer as soon as possible. However before you do, write notes about what has happened, so when you speak to an assessor you are able to relay the facts and keep a record of what you have said at the same time. Take photographs for your record as well. The insurer may want to send a third party claims manager to see you before you can begin any restorative work. If you have been honest about your circumstances and the state of the property and contents, and continue to be honest and cooperative whilst the claim is being examined, you should have nothing to worry about.

The most important thing to remember is to carefully read the small print before you buy and ensure you understand the scope of the policy, its exclusions and your obligations. For the duration of your policy, adhere to the terms and conditions you agreed to at inception, such as maintaining your burglar alarm, locking windows or not subletting your house, etc., and let insurers know if there are any change in your circumstances. It is hoped you will never have to make a claim, but if you do, hopefully you will have bought the best coverage you can afford, for your particular home and family.

Final Thoughts

Prior to educating myself on this topic, I never realized that your dwelling coverage has to include the value of demolition, possibly re-pouring your foundation, or any of those things. In addition, when we bought our first home 3 years ago I was WAY oversold on the amount of personal property protection that we had. Being very frugal has meant that we don’t have many valuable items in our house (nearly everything we own is a hand-me-down); so, when I reviewed my policy I realized we had over $100,000 worth of personal property protection. After doing some calculating, I quickly realized that I was paying for about $80,000 of insurance that I could never use or need.

Picture by FreeDigitalPhotos.

About the Author

By , on Nov 25, 2012
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of WorkSaveLive.com.

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{One Comment}

  1. Matt says:

    Good article (retweeted).
    In the UK, we are seeing a slightly different “blanket” policy approach emerging where insurers are bracketing people with “upto” £500k buildings cover, and “upto” £50k contents, for example.
    It has it’s pluses and minuses, the pluses being you don’t need to make an accurate estimation of what the total rebuilding cost of your property is, to make sure you have proper cover. In my case, even the highest estimate for my house is still half of this. Of course, the minus, is that you end up paying more, but then, across the insurer’s whole portfolio, most people won’t need £500k cover, so it’s not as expensive as it could be. The main minus though, is that most insurers have jumped on this as a good idea to increase margins, so it does leave the average consumer with a higher than necessary bill and less choice in the matter.

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