Jun 6, 2011

Home insurance is the best practice

Home insurance isn’t really complicated the cover you need is usually pretty much contained within the standard home and contents policy. You also need to know how to check your policy to make sure you are adequately covered. Best practice for homeowners is to learn how to go through a policy and understand the cover provided.

The issues:

Home and contents insurance provides a degree of cover for financial loss in the event of fire, building damage, theft or other events. The problem for homeowners is that the amount of insurance payable needs to be monitored to ensure that the insurance payout meets their needs. This can be a slightly tricky process, because people tend to accumulate materials over time, and the real value of their property, particularly contents, can go up quite a lot.

If you buy a $10,000 home entertainment system, the net value of your contents has just gone up. In your insurance, unless you change the value of your cover, will however be still set at the same amount as prior to purchase. 

Home insurance basics:

You’ll notice that your policy is broken up into specific areas of cover. Each of these sections covers particular events and the amount of insurance payable in each case, up to a maximum amount or percentage amount, in many cases.

The issues for policyholders are:

1. “What’s payable if…?” scenarios: Read the policy and you’ll see that each area for which cover is payable relates directly to a specified amount. The rate of cover is based on that figure.  

2. Percentile amounts of cover: The percentage for maximum cover is derived from a set value for that particular item. You’ll see something like, “up to X% of the sum insured”, for example.

3. Cover for specific items: Contents insurance doesn’t cover particular items. It covers “contents” as a general term.

4. Fine art, collectibles and antiques: The best cover for these items will usually be a general figure for “artwork”, and it will usually be pretty low, not much more than $10,000, not enough to cover really valuable pieces.

5. Fire insurance: This is essential, and the issues with fire insurance are also related to updating cover values.

6. Building insurance: Insurance for accidents, willful damage and other types of issue can be complicated by things like renovations, rental of a property and other issues.

7. Public liability: The average policy now has about $10 million cover for this type of insurance.

Best practice:

The major incentive for homeowners and policyholders is to ensure that their insurance really covers hard dollar values. That’s not always easy in an era of fluctuating house prices and cost of living prices, but in general, higher cover is better practice, ensuring best returns.

Not all insurance policies are created equal, either. Best practice includes best policy management options. You can get excellent deals in home insurance, particularly from the new online insurers, and even manage your own policy online, without the bureaucracy of traditional insurance procedures. 

Check out your policy and do some research, if you can get a better deal then why not.

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