Some people want to ensure that their physical building is protected against the financial risks of loss or damage. Protecting personal possessions – the things that makeup what’s described as home contents insurance – is a small and secondary consideration.
For others, the major financial risk of the physical building that they live in is either covered by another insurance policy or not their concern because it’s not theirs.
Either way, owners of valuable assets may be tempted to save on their policy premiums; the problem is, when they do make a claim, they find they’re not sufficiently covered. Ordinary home insurance policies can offer low premiums because they come with ‘small print’ limiting the amounts they payout. So, if you own a higher value home and valuable assets, it may be too late when you realize you’re not adequately insured.
The golden rule of general insurance is to remember that you will get what you pay for! The industry is highly competitive and adapted for each country, and premiums are calculated on the historical loss data of that marketplace. If the premium is low, you can be sure that the coverage is also low.
What type of home insurance do you need?
Home contents insurance or building insurance? It’s very important to understand exactly what is insured and for how much. There are typically three types of policies in the marketplace:
- Full replacement
- Agreed value
- Depreciated cost (non-recoverable depreciation)
The best place to start is to consider what financial losses you cannot afford. Make a list starting with the highest value items; obviously, a physical building is up there but when most people go through this exercise, they tend to be surprised at what the replacement value of all their possessions could add up to. The good thing is that losing everything through an event such as a fire has a low probability; it, therefore, costs less to insure than, say, the risk of loss through theft or an accident.
Important: Read the fine print!
There is a great risk that the full description as to how much you will receive is hidden in the policy fine print. Always read the policy wording! If there are words that you don’t understand, make sure you ask the insurer for the meaning.
What additional insurance covers are important?
Are you protected against the financial risk of your actions or inactions causing financial harm to other persons? Personal liability cover might be an infrequent claim but the financial loss from settling that liability can be very damaging. Examples include someone slipping in your apartment, or a child falling off a wall.
In the case of fire or flood damage, can you afford the additional living expenses while you can’t live in your home?
Do the policies you’re looking at cover Newly Acquired Items? Or do you need to get your policy endorsed for expensive new items? (It’s not too hard to knock a coffee onto a new laptop, for example!)
Are there limits on claims on Valuable Items? Once again, often these limits are buried deep in the fine print.
Are your possessions covered outside of your home? What if you’re traveling? Most travel insurances have very minimal coverage for personal possessions; phones and jewelry seem to be the key ones.
How does the policy define Accidental Damage and Negligence? This is also often in the fine print!
Keep good records for home insurance
This is a great habit to get into because insurers will require proof if you claim. And remember: How you complete the proposal form often has a significant influence on both the cover that you end up with and the premium you pay.
While it’s easy to think Home and Contents Insurance is a ‘tick the box exercise, thorough financial planners appreciate the need to assist customers to understand and acquire the cover that will ‘do what it says on the tin’ and meet their needs when it matters. This is especially the case when there are valuable possessions that are part of what makes their clients who they are – be it their homes, collectibles, heirlooms, or passions.
Insurance Market offers a wide range of general insurance products (such as travel insurance, maid insurance, pet insurance, and more) online and life insurance through personal advice from our qualified brokers. Please contact us at [email protected] or +6569081811 if you have any questions.
