Home is where the heart is. It’s also where all of your most prized possessions are. Your house is likely to be the largest single investment you will make in your lifetime. Therefore, it’s crucial that you ensure that you have the right coverage.
When it comes to household insurance, there are two kinds of policy: buildings insurance and contents insurance.
- Buildings insurance covers the structure of the home itself, as well as the fixtures and fittings.
- Contents insurance covers the contents you would take if you moved.
In addition to covering against risks like fire, theft, flood and windstorms, both include public liability extensions. This provides for claims which you may become legally liable to pay in respect of injury to a person or damage to property.
Homeowners insurance will provide coverage for damage to your home (and contents, if noted) caused by a list of named perils including:
- Fire and lightning
- Catastrophe (e.g., windstorm or hurricane) coverage may also be included for an additional premium.
Homeowners insurance also provides coverage for your liability as an owner (or occupier) of the home.
Understand your policy
Make sure you understand everything in the policy. Read your homeowners insurance policy to find out exactly what is and is not covered. Do this before you suffer a loss so you won’t be surprised. We are always available to answer any questions you may have.
Most homeowner insurance policies limit coverage for certain high-priced or hard-to-replace items. Personal possession (or “All Risk”) coverage can be bought to protect items like engagement rings, watches, antiques, and other valuables. Items over a certain amount will need to be appraised.
Depending on the financial institution, a mortgage lender will require that borrowers purchase a minimum amount of homeowners insurance (typically the replacement value of the building). We recommend obtaining a professional appraisal which will help you in determining how much it would cost to rebuild your home. It is the rebuilding cost of your home (excluding the cost of the land) that should be used as the sum insured.
You get what you pay for.
Are you willing to pay more to have damaged personal property replaced? If so, consider purchasing replacement cost contents coverage with your homeowners insurance. When it comes to valuing property, insurers generally use one of two methods. The first, actual cash value, pays you an amount equal to the replacement value of the property, minus depreciation for the years you owned the item. The second, replacement cost, pays you the full value of the item today, so that you can replace the old item with a new one. Almost all home policies are now based on replacement value so it is very important to keep your sums insured adequate to avoid under-insurance.
How deep are your pockets? To save money, consider choosing an increased catastrophe deductible of 3%, 5% or even 10%. In the event of a loss you’ll be required to pay this amount out of your own pocket before your homeowners insurance takes over, but in the meantime, you’ll save on premium charges.