When you purchase a new home it is important that you take out a homeowner’s insurance policy to protect the structure of your property, and also its contents. Working out exactly how much cover you need can be difficult, but by following a few simple guidelines it can be done.
In general, homeowner’s insurance falls into two main categories; buildings insurance, and contents insurance. Buildings insurance covers the building itself, plus any outbuildings, and all fitted fixtures such as kitchens and bathrooms, whilst contents insurance basically covers all items within your home that you would take with you if you were to move.
When calculating how much building’s insurance you require bear in mind that you only need to cover the cost of rebuilding your home, and not its current market value. Make sure that you periodically re-assess how much building’s insurance you have in place as if you extend your home you may find that your insurance cover is inadequate should you need to make a claim.
To find out how much it would cost to rebuild your property you should take a look at the initial survey report that you received when first buying your home. Alternatively, calculators are available online that will help you to figure out how much cover is adequate.
Many people make the mistake of underestimating how much their possessions are worth when taking out contents insurance. To get an accurate idea of how much cover you need then go through every room in your house and make an inventory of exactly what you own, and how much it is worth. Make sure that you include items such as clothes, jewellery, gadgets, furniture, and soft furnishings; even lower value items like books and CDs can soon add up!
Homeowner’s insurance policies can vary considerably between insurers so before you sign on the dotted line it is important that you either speak to your insurer, or read the small print very carefully to make sure that you understand exactly what is covered. Some policies are very comprehensive and cover a wide range of items, whilst others will only include certain items as additional extras. For example, certain high value, or high risk items may need to be insured separately, this includes; bicycles, laptops, antiques, and expensive jewellery and watches.
When you take out homeowner’s insurance you will be offered a number of optional extras which will add to the cost of your policy. It is wise to consider carefully whether these optional extras are necessary, and if you are likely to benefit from the extra costs involved. One common home insurance extra is cover for accidental damage. This basically covers you in the event that you have an accident within your home that results in your possessions being damaged; for example, spilling paint on your sofa whilst decorating. Another popular add-on is cover for personal possessions outside of the home, which, as the name suggests, provides cover for those valuable items that we take with us when we leave the house, including mobile phones, and tablets.
Other additional extras that you may wish to consider include legal cover, which offers you legal liability protection in certain circumstances, home emergency cover, which covers you for temporary repairs due to a domestic emergency, cover for alternative accommodation should your home become unlivable, cover for locks and keys, and new for old cover which means that any claims you make will be paid out on a new for old basis.
It is vital when taking out homeowner’s insurance that you avoid the pitfall of being under-insured. Although taking out too much cover can be an expensive mistake, taking out too little can be financially disastrous. As an example, say your house was severely damaged by fire and the cost to rebuild it was £180,000, but your building’s insurance was set too low at just £160,0000. This would leave you with a shortfall of £20,0000; a sum of money that could prove difficult to find, and leave you with a property that was basically inhabitable! The same rule applies to your contents cover; make sure that you calculate accurately what your personal possessions are really worth; you may be surprised to find that the figure is higher than you think!
Finally, when you have an accurate figure for both your buildings and contents cover it pays to shop around in order to get the best deal. As a homeowner you will probably find that it is cheaper to take out a combined buildings and contents policy with the same insurance provider. Do your research thoroughly; internet price comparison sites are a great way to access the very best deals, although remember that not all insurers are included on these sites. You may also find that it pays to consult with an experienced insurance broker; particularly if you are at all unsure of how much cover you need.
Homeowner’s insurance gives you peace of mind that your most valuable assets are covered should the worst happen, so make sure that you have adequate cover, at a price that you can realistically afford.