Statistics show that few Americans insure their home against damage, yet it is often their most valuable asset and needs all the protection it can get. The trauma experienced by many Americans who arrive home to find their house has been burgled is too often heightened by the fact that their possessions have not been properly insured, if at all.
Recent government statistics show that more than half of household assets in America are not insured and often homes are under-insured.
Being underinsured is a tragic situation many people find themselves in. For most of us, a home is the most expensive asset we have and it needs all the protection it can get. If you have insured it, you must revise the amount insured over the years. Many wildfire victims who have lost their homes discovered replacement was impossible because the homes were greatly under-insured.
The Homeowners and Householders Policy normally covers the buildings and/or contents of your home, garage and shed, fence and other domestic improvements, such as an in-ground pool. Any major improvements to your home would be additional.
The policy covers against risks of:
- fire, lightning, explosion, earthquake
- storm and tempest
- burglary, theft
- malicious acts
- riot and civil commotion
- impact by vehicles, aircraft, falling trees, aerials or TV masts, animals, glass breakage
- water or oil leakage
- accidental breakage of certain property
Cover normally extends to include architects’ and surveyors’ fees, cost of removal of debris, burning-out of household electrical appliances by the electric currents, loss of rent where buildings are insured, and the additional cost of renting temporary accommodation where contents are insured.
Insurance companies offer different packages so it is necessary to read your policy thoroughly and know just what you are insured for. Because insurance companies offer cover for something that might happen, householders who live in areas where a river rises regularly and causes flooding in their home will find it difficult to get cover at an economical cost for the flooding which will happen.
However, policies usually cover flooding from rainwater caused by a storm dislodging a tile on the roof. Cover can be affected if the house is left unoccupied for a period longer than specified in the policy – so understanding your policy is vital.
House and contents can be insured separately with different companies. This often happens with rented accommodation where the landlord insures the building and the tenant takes out a policy to cover his personal possessions.
Insuring both house and contents with the same company can simplify a claim. Some insurance companies consider items such as wall-to-wall carpets or a glass shower screen as part of the house while others classify them as contents. Again, careful reading of your policy is important.
Some companies include the contents of freezers under the contents of the house, while others only cover freezer contents with an extra premium.
Value your contents
Before taking out a policy you need to decide whether you want an indemnity policy or a replacement policy. An indemnity policy is intended to leave you no worse off and no better off than before your loss occurred.
Many insurance companies are now offering replacement policies. The sum insured in a replacement policy has to be sufficient to get you a house in new condition, or in the case of contents, all the contents up to a specified age at current prices.
Household linen and clothing can usually be insured only for the indemnity value. Contents over the specified age (usually 5 or 10 years old, but it varies from policy to policy) may be insured only for their indemnity value.
To decide on a sum under a replacement policy you have to take into account the current cost of rebuilding the house, together with an allowance for cost increases during the period in which the policy will operate.
Allowances must also be made for cost increases during the period in which rebuilding will take place (this may take up to 12 months), for surveyors’ and architects’ fees, and for the cost of removal of debris.
The simplest way to value your contents is to go through your house or flat, room by room, not forgetting outbuildings such as the garage or shed, and make an inventory of everything.
The contents covered usually include:
- household goods
- personal effects
- domestic workshop tools
- garden equipment and outdoor furniture
- leisure and sporting equipment (while in the dwelling – not when in use or transit)
- clothing and limited cash cover
Works of art, curios and other valuable items should be separately specified, otherwise, according to many policies, cover on each item may be limited to a percentage of the total sum insured, or they may not be covered at all.
To obtain the best possible insurance protection for your assets you should photograph and document such valuable items as paintings, jewelry, antiques, electronic equipment, stereos and television sets, noting serial numbers where possible and putting your own identifying mark on other items. This information should be kept somewhere safe, such as your bank.
When you take out a policy you agree to insure for the full value of the house and its contents. If you do not revise the sum insured in a policy that is several years old, inflation alone, without allowing for any improvements to the property or additions to its contents, can cause your house to be heavily under-insured. With many insurance companies, under-insuring is a breach of contract. The insurance company may be entitled to reject the claim.
Many insurance companies offer a “home package policy” which gives you the opportunity to extend the scope of insurance benefits for a small additional premium.
As well as house and contents insurance, such a package may offer some or all of the following:
- Domestic worker’s compensation: this policy is intended to provide protection for any domestic help you employ.
- Personal liability: this protects you against financial loss as a result of your carelessness or negligence. You are covered if a visitor stumbles and injures himself because you haven’t repaired that broken section in your front path.
- Multi-risks insurance: sometimes called “personal property” insurance, it covers special items which are likely to be removed from your home, such as personal effects, cameras, sporting equipment or jewelry.
Any structural damage to houses (including your neighbours’) as a result of tree-induced drying is not covered in the usual homeowner’s and householder’s insurance policy. However, sometimes it may be covered in a package policy.
Some people may consider insurance an expensive luxury, but as many people find out to their cost it is often a necessity.