What does home insurance cover?
Most home owners, if they have a mortgage, will be required by the lending institution to buy some type of home insurance to cover their home and mortgage payments. However, even if your lending institution does not require home insurance, it makes sense to take it anyway. It will protect one of the largest purchases you will make during your life time.
What is home insurance?
There are many types of home insurance but, basically, it will insure your home against various circumstances. This usually includes weather-related incidents, such as flooding, hail and earthquakes that may damage your home. However, some insurance policies may exclude specific natural disasters, especially if you live in an area that is prone to flooding, for example. Then you may need to find specialised flood insurance or take your own measures to protect your home.
Other incidents covered by home insurance include theft, vandalism, fire and so forth. Many events that may damage your home or property will be covered; however, most policies will have some exclusions, so it is important to know what these are.
There may also be so-called liability insurance in the coverage, which would include accidents that may damage the home or people in the home. However, most liability coverage will have maximums and excesses, so it is important to understand what these are. You should also know that standard insurance contracts will not cover special items in your home. These include, for example, expensive jewellery, antique furniture, and stamp and coin collections. To insure such valuable items, you will probably have to seek out additional contents insurance and pay a separate premium for it.
As with any insurance policy, there are excesses to home insurance. This means that you will have to pay a certain amount out of pocket before the insurance company pays out on a claim. As a rule of thumb, the higher the excess, the lower the premiums.
Is it possible to lower home insurance premiums?
There are many ways insurance premiums are calculated. However, most insurance companies will have a standard formula that shows them the risk of a claim, depending on where your home is located. This will assess the risk for theft, vandalism and natural disasters, for example. There is very little you can do to change the risk profile of your home.
However, there are simple measures you can take to help lower your home insurance premiums. For example, installing a home alarm or surveillance system will increase the security of your home and decrease the likeliness of a break in. Other measures could include installing smoke alarms or sprinkler systems, lowering the possibility of fire damage. Also, it is possible to work together with your insurer and get advice on how you could reduce your premiums. Most insurers will be happy to help.
No claims bonuses also play an important role in premium levels. If you do not make any claims on your home insurance policy in a year, you will generate a no claims bonus. This will continue and accrue for every additional year you make no claims. So, before making a small claim on your home insurance policy, decide on whether it makes sense to sacrifice your no claims bonus.