Do you know what is home insurance? What are the benefits of having a homeowners insurance policy? If not then don’t worry. Today, we’ll be going over what home insurance is, a quick overview of importance of having such a policy and some tips to save real money while buying a policy in colloquial manner.
Home is a biggest investment that most of us ever make only once in our entire life. Unfortunately, there’re millions of people out there who just dream to have a house, no matter how big or small it’s. One can ask them how important is it to own your own house?
Our dream houses and their contents are always exposed to a number of possible mishaps such as natural calamities (earthquake, storm, fire etc), theft, burglary and the like.
Therefore, having a home insurance policy gives us peace of mind that we cannot postpone or stop such unfortunate events, if these are supposed to happen with us but we’re financially prepared to cope with them.
Everybody insures his/her motor vehicle but a very few percentage of people buy home protection plan which is our biggest investment. So today we will know everything about homeowners insurance including what is home insurance, why it’s important, and who should buy it.
A large percentage of homeowners do not buy home and contents insurance assuming that they would not face such setbacks. For those who think so I just want to say, “Ask those who have become victims of such catastrophes?” I’m cocksure that none of them is going to say that he/she already knew that it’s going to happen.
Therefore, it’s always worthwhile to have a home insurance policy.
There is a big misconception among many individuals that a homeowners insurance policy only covers building or structure of a house. But, here, I want to clarify that a home insurance policy covers home contents such as electronic appliances, jewelry, antique items, and everything that you want to insure along with the structure of your house.
What is home insurance and what does it cover?
Home insurance often called homeowners insurance, as name indicates, protects a home and its belongings against insured events.
Just like life insurance protects insured person against eventualities like death or permanent disability, motor insurance protects the vehicle owner against legal liability arising from an accident, home insurance protects your home and belongings against natural calamities, vandalism, burglary, theft and the like events.
Some policies also provide coverage against accidents in the home.
Homeowners insurance compensates for natural disasters such as hurricane, earthquake, fire, cyclone, lightning, flood or any other natural disaster.
Just like that if home contents are stolen, this insurance indemnifies the losses. It does not stop here, some home insurance companies pay even for periodic home repairs.
If one is concerned about his home and contents’ safety then home insurance is something that he needs to protect his interests.
Wait! There’s no doubt that home and contents insurance is a good option to safeguard our home but still it’s not something that everybody needs. For instance, if you’re living in a safe society and there’s proper surveillance then you can avoid buying insurance.
Also, if your area geographically belongs to somewhere where natural calamities are less likely to happen then insuring your home would not be a wise decision. In that case, instead of insuring home, you can invest your money somewhere else to meet your future financial goals.
How is the home insurance premium decided?
After knowing what is home insurance, you might be pondering how insurers decide premium for a house. Let’s know.
It’s obvious that every home has its own market value depending upon its size and inside contents. Therefore, home insurance companies cannot offer a flat premium for all homes. Every home’s insurance premium will be determined on the basis of how much space is there in the house, its market value including contents (if they need to be insured), geographical location, chances of natural calamities, crime percentage in the area, condition of the house and the like.
After considering mentioned points, insurer decides how much premium a homeowner would need to pay to get insurance policy for his home.
Can you be denied home insurance?
Yes, home insurance company may deny policy to you if your home does not meet its terms and conditions.
Before giving insurance to a house, home insurance companies examine many things like where the house is built (geographical location), its current condition, what it contains (if you want to insure belongings too), and how old the house is. In short, they just try to know rebuild cost of your home.
If the house is located in a high risk area; in terms of weather or crime, then home insurance company can refuse to insure your home. Because chances of mishaps are greater in such areas which would not be in favor of insurance company.
Apart from that, houses older than certain threshold may face homeowners insurance policy denial.
For example, if your house is older than 50 years, insurance company may refuse to insure your home. Similarly, if your house is in some place where natural disasters such as landslide, earthquake, cyclone and the like, probabilities are high then the insurance company can refuse home insurance.
Though, high risk area are generally not covered in basic insurance policies but it’s very true that people of those area are more likely to insure their homes than others. Therefore, keeping this thing in mind, insurers have launched tailor made home insurance policies to cover properties in such areas.
You pay high premiums but in returns you get home insurance policy.
Usually insurance companies insure only building of the house, at a very reasonable premium. But some people also want to get home contents insurance. In such a situation, companies increase home insurance premium and insure the same including home.
It should be noticed that if you live in an area frequently affected by flood, earthquake, landslide and similar calamities, you may need to pay a higher homeowners insurance premium.
Do you really need home insurance?
Now comes the most important question, do you really need home insurance?
First understand, nobody wants to get insurance, especially for home. But it is still an essential thing and everyone should get it. Here are some points that can help you know if your home needs to be insured or not.
Reasons to have homeowners insurance:
- If you are always afraid that your house may be robbed after you and your valuables may be stolen, then for your peace of mind get home insurance. After insuring your home, you will feel relaxed that your house and its belongings are protected by the insurance company.
- If your house is located in high risk area then you can get it insured.
- If there are frequent incidents of theft in your area then you can consider buying home and contents insurance.
- Every house requires period maintenance. If you feel that you will be unable to repair it when needed, you can think of home insurance which also pays for the repair of your home. Usually, policyholders would need to buy supplementary cover to get such extra benefits.
- Most mortgage lenders require you to buy insurance if you want to have a mortgage.
Who should not buy home insurance:
- Houses located in a place where there has been no property loss noticed due to any natural disaster in the last 10-15 years, then home insurance would not be beneficial.
- If there has never been a theft in your neighborhood and there are also CCTV cameras installed, in this situation, it would not be beneficial to take insurance to secure household goods.
- If you’ve bought a home protection cover while taking a home loan then you’d not need another policy to protect the same. In that case, you can contact to your insurers and add supplementary cover to get extra cover.
Benefits of homeowners insurance
Are you still skeptical whether to purchase home insurance or not? Then for your help, here are some benefits of homeowners insurance. Read them carefully. These benefits will certainly help you make a right decision.
Get home insurance for accidental events such as fire, theft, burglary, riots, strikes, and the like
When talking about benefits of homeowner insurance, first compelling benefit that alone is sufficient to force someone get his home insured is ‘Fire’.
Every year fire destroys tens of thousands of houses around the world. It not only destroys houses, it destroys countless dreams. You might have heard through news channels that how had famous skyscrapers caught fire. If not then just type some fire related keywords like building caught fire, on Google to know more.
Are you thinking I’m going off-track? Sorry! I’m not.
Here I’m intentionally mentioning this, just to make you aware that if famous buildings like skyscrapers, that use up-to-the-date fire safety mechanisms, can catch fire then why not our houses?
Though it (home insurance) cannot stop your house from catching fire but it can certainly help you reconstruct everything. Also, such policies minimize the chances of fire incidents. How? Because most home insurers ask customers to install fire safety alarms and fire extinguishers at their houses to get extra discounts on premiums. Having adequate fire safety equipment at home can save a home turning into ash.
Home insurance also protects our house contents against theft or burglary. Everyone likes to go on vacations, me too, but when we go on vacations then we also clear the way of thieves. They can come and test their sleight of hand.
Again, insurance can’t stop them but certainly can save you against a heart attack (Just kidding!) by giving you compensation up to the cost of actual loss.
Nowadays, people come on roads (to show their displeasure in a peaceful way) to protest against any unlawful or unacceptable activity. But some crook minded people may turn a peaceful procession into riot and then everybody knows what happens.
A homeowners insurance policy also protects your home and its belongings against such events.
Insure your home against natural calamities such as earthquake, storms, lightening, flood, and cyclone
We humans are technologically very advanced but still we can’t control act of mother nature. We’re nothing front of its acts. All we can do is keep nature happy (How? Plant more trees, save water, decrease carbon omission, use less air conditioners (big culprit)) and be financially ready if we face natural disaster.
A property insurance (home insurance is a part of property insurance) protects your assets against natural calamities such as earthquake, storm, lightening, flood, cyclone and the like. These are uncontrollable natural disasters, which ruin lives of many people every year. Therefore, one should have a policy to tackle with subsequent situations.
Get home contents insurance
Homeowners insurance not only protects your home but also your home contents.
While buying a home insurance policy, you can select different valuable items of your house to insure along with the building. You can select your electronic goods, jewellery, antique items or anything you want to get compensation for, in case of theft or damage.
By doing so, your home insurance premium rates slightly increase but you get significantly higher benefits than you pay. This is one of the best benefits of homeowners insurance.
Peace of mind
Peace of mind, sorry for offense! Talking about something that is very hard, I should say impossible, to achieve, in today’s hustle and bustle. But when it comes to your home safety, ‘Yes’ home insurance can give you peace of mind and assurance that your home is protected.
Homeowner insurance reduces stress and anxiety in people by giving them peace of mind that their houses are protected. If you have opted a right home insurance policy for your house then it certainly gives you peace of mind (Only if you have acted like an analytical buyer, one who reads all terms and conditions before signing a contract).
Insurer pays your rent if needed
Once disaster passes away, it takes time to rehab a house in proper order. Meanwhile, you would need to reside in a temporary accommodation, perhaps on rented. In that case, insurance company pays for your temporary accommodation.
Sounds good? Yes, it’s true. Some home insurance companies pay for temporary accommodation.
Pay less get more
Unlike other insurance products such as life insurance, general insurance, and health insurance, you pay very less premium in home insurance. And in return, you get huge benefits.
These types of insurance products give flexibility to customers to further increase or decrease premiums rates by removing/adding items to be insured and increasing/decreasing percentage of deductibles.
Get discounts on premiums for taking safety measures
Frankly saying, as a businessman perspective you would also agree, every insurer wants to enhance his profits. But if he keeps paying claims then how could he do that. Therefore, to hike profits and reduce chances of mishaps, insurance companies offer extra discounts for customers who have installed safety gadgets such fire alarms, surveillance cameras etc, to control mishaps.
Above were some benefits of home insurance.
Important: Remember all insurance policies are subject to certain exclusions (an event of loss or damage that an insurance policy does not cover is termed as exclusion), therefore, before buying an insurance policy (life insurance, health insurance, or general insurance like home insurance) read inclusions and exclusions clearly. You can take help of your financial advisor to understand the policy wordings.
What it doesn’t cover?
After knowing what are the benefits of homeowners insurance, it’s time to know the opposite. Every insurance policy provides protection only for certain events, it does not compensate for every kind of loss. Following are some events that a home insurance policy does not cover:
- No claim will be paid for intentionally causing damage to home or its belongings.
- Losses caused by any type of war, whether it is nuclear war or civil war, are not covered.
- Basic home insurance policy doesn’t cover losses due to natural calamities.
- Read your policy document for more information or ask your insurer to provide you policy brochure.
Tips to buy cheap home insurance:
Are you convinced, after reading benefits of home insurance? Then, here are some tips to save real money while buying a policy:
- Ask your insurance agent to provide you discount on premium. Keep in mind if you would not ask then he’d not give.
- Use insurance aggregators websites and compare premiums of different companies. And go with one that offers more benefits but low premium.
- Read reviews of insurance company and try to know how well it handles claims requests and what is its claim approval percentage.
- You can buy homeowners insurance online too. This way you can save 10-20 percent on first year premium.
- Do not trust insurance agent, read policy wordings carefully. Clearly know what does your policy cover and doesn’t. Do not assume anything. Remember you will get cover for only events which are written on the policy documents.
From where should you buy insurance for your home?
Many general insurance companies insure homes. You can buy a policy from any of them. You can get insurance by going to your nearest general insurance company office or you can also buy home insurance online. Click here to see the list of registered general insurance companies of India.
You can buy policy directly by visiting the website of your preferred insurance company or from an insurance aggregator’s website.
In my opinion, insurance aggregator website is a good option to buy insurance. Because such websites let you compare policies of different companies. You can buy your home insurance policy from a company that offers good facilities at low premium.
Also, we can’t ignore buying policy through an insurance agent. If your insurance agent is educated enough then he can suggest a best home insurance policy. You’re not obliged to buy policy from an agent but believe me he/she can give right advise.
Financial advisors also help you pick a right policy for your home. Therefore, must consult a financial advisor or insurance agent before making a choice.
Home insurance is an essential thing to live a hassle free life and cope with unforeseen events that arise due to above mentioned reasons. Premium rates are comparatively lower than the benefits paid. Therefore, you should think of insuring your dream house.
You can check premium rates on the internet and can also buy home insurance online. While buying a insurance policy carefully read, “what does it cover and does not cover?”
Do not believe on verbal commitments made by your insurance agent, because there is no scope for them while we’re entering into a legal agreement. Read policy brochure carefully.
If your house is already insured by a bank or lender, in case if you have taken loan, then it is worthless to buy another home insurance policy; unless you think that policy does not cover the events that you want to insure.