If you undervalue your house then you would be required to make more payment from your pocket at the time of claim
We spend our hard-earned money to build our house but home insurance is always last on our priority list. By not buying home insurance, we not only stay exposed to risks posed by fire and allied perils, including lightning, flood, earthquake, or storm but also to threats like burglary.
Home insurance may not help you in avoiding these untoward incidents but it could help you with financial support to recover from the losses.
We take a look at things to consider while buying home insurance.
Different types of insurance
Home insurance comes in two different forms -- for building and content. Building insurance covers building fabric and permanent fixtures. Content insurance covers personal belongings like furniture, valuables, clothes among other things.
It's important to take both types of insurance or opt for a comprehensive package that helps in covering the building structure and its contents. It also helps you in saving on the premium cost.
Home insurance does not cover the cost of land
A typical home insurance policy does not cover the cost of land. It only pays for the cost of construction that is derived by multiplying the carpet area with the cost of construction in your city.
Correct valuation should be done
Before buying home insurance, the most important step is to make the correct valuation of the house and its contents. If you undervalue your house then you would be required to make more payment from your pocket at the time of claim. You can ask an assessment company to help you in evaluating the worth of your house. Also, the premium cost depends on the amount of coverage and in such a case, the higher it is, the more will be the premium cost.
Actual cash value or replacement cash value
You can insure your house for either actual or replacement cash value. The actual cash value is the amount you would need for replacements or repairs after depreciation. The replacement value is the amount you would require for replacements or repairs without depreciation.
Deductibles
It's the amount that you pay out of your own pocket at the time of the claim. It's important to keep in mind the deductible limit while buying a policy as it should be affordable.
Discounts
Certain things can help you earn a discount on your insurance. Things that make your house safe, such as its proximity to fire or police stations. Installing safety equipment like CCTV or burglary alarm at home.
No claim discount
In case no claim has been made under a policy for a year, you can avail of the no claim discount at the time of the renewal. This will help you in saving money on premium costs. However, not all insurers offer this service.
Update policy regularly
If you make new additions to your building like the construction of a new room, or if you add new contents to the home, then it's very important to reassess its value to ensure optimum coverage.