Insurance is vital for owners of property, simply because housing is worth so much money. Recent statistics showed that six percent of homeowners make a claim in the space of just a year – 97 percent of which are related to property damage.
However, research by the property data provider MSB shows that almost six out of 10 homes in America don’t have enough insurance; most policies would only provide enough cash to pay for 80 percent of a property’s rebuild.
Whether you have mortgaged your home or are a cash buyer, your property is likely your most valuable asset – so it makes sense to protect it. However, the insurance product you choose for your property depends on what you plan for its use.
Buyers that intend on living in their property require several different forms of insurance to ensure the building, possessions and family are secure.
Insurance should cover damage to the building due to crime and weather; and damage or theft of the possessions inside the home. Owner-occupiers will also require life insurance which allows family to pay off the mortgage in the event of their death.
Damage to the building
Homeowners insurance is the cover which protects the building in the event of either natural or criminal damage. For example, should a property burn to the ground, buildings insurance will pay for its rebuild. A fire occurs somewhere in America once every 23 seconds, so this is a vital requirement, particularly since the average claim for fire damage is currently $31,762.
To ensure your policy doesn’t fall short, when purchasing a property, check the legal surveys for indication of any extra risks. Houses built close to waterways will need extra protection from flooding – even if the risk is only minor. Around a quarter of insurance claims come from areas where flooding is of just a low to moderate risk and standard policies tend not to protect against flood damage.
Additionally, a property’s value generally increases over time, as does the cost of building. By forgetting about your policy for a decade and simply paying the premiums, you could find yourself underinsured when you need to claim. Instead, you should review your policy and take a look at the economics of the industry every few years to see if you are comprehensively covered.
Loss of possessions
Contents insurance covers the loss of possessions due to damage and theft. Take care to detail anything of worth to make sure its value can be reclaimed in full.
The World Finance Group states that many families fail to re-assess their life insurance coverage after a significant life event such as having children. Seventy two percent of people take out life insurance policies when they get married but that increases to just 75 percent when they have children. On top of that, three out of every 10 US households have no life insurance at all, according to LIMRA.
Homeowners should again take care to reassess their life insurance needs every few years, or after major events such as a new addition to the family.
Life insurance offers protection to your family and your bank in the event of your death, by ensuring the funds are available to pay off the mortgage. Extra clauses can be added to the insurance, which cover for illnesses and redundancy – to allow for the payment of the mortgage if regular income is hindered. Taking out this level of income protection insurance will make your premiums higher – but many people deem it worthwhile, especially in the current climate with the threat of redundancy biting at the heels of many businesses.
For owners of rental properties, insurance needs differ slightly from those of an owner-occupier. A specific rental dwelling policy called a Rental Property Insurance or a Dwelling Fire Policy is required to cover properties you don’t personally occupy. This covers the structure of the house – or the proportion of the building owned by the landlord – as well as providing some cover for contents and liability protection.
Liability protection protects the landlord against any claims due to bodily injury incurred within the property and would defend against any negligence held against the landlord.
Landlords may also be required to provide tenant relocation to their policies, if the dwelling houses more than one single family. This would cover the tenants’ expenses if they had to move out due to damage to the rental property.
Some landlords like to protect themselves further by ensuring all tenants have a tenancy policy. A tenancy policy ensures the tenants are covered for any injury they cause in the home, rather than attempting to claim through the landlord, which could be very costly.