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Do you think you would ever want to rebuild your house and possessions from scratch again – all the work and tears as well as the cash and repayments!

Secure yourself from the eventualities. Home insurance covers the cost of damages caused to your building while contents insurance covers the cost of your possessions such as carpets, curio and DVDs. Though packaged together as ‘home and contents insurance’ generally, these are two different covers and you can work them out separately to suit your specific requirements.

a) Home Insurance

Home insurance or building insurance covers the damage caused to your building due to fire, earthquake, storm and other defined events. You could extend it to cover your garage, lawn and other structural areas of the house as well. Choose your cover wisely to protect your biggest investment.

1. How do I choose the right cover?

Most lenders require you to have a home insurance, and for good reason too. It is prudent to adequately cover your home against future damage. However, with so many products in the market, it can be tough to make a choice.

  • First, decide on the kind of cover you’d like. Total replacement cover would include the total cost of rebuilding the house (calculated as per its condition prior to damage) while sum-insured cover will protect you for a certain amount.

  • It is a good idea to contact more than two insurers and compare the quotes. Ask a lot of questions to ensure all your worries are covered! Use online calculators to estimate the cover you require.

  • Check on inclusions. For example, not having flood cover can lower down your premium if you don’t stay in a flood prone area, excluding it in any other circumstance can leave you distressed.

2. How much cover do I need?

A little extra is good. Rebuilding your house will lead to further incidental costs.

Cost of temporary accommodation in case of major work; drawing the building plan and having it approved; cleaning up the site and labour costs hugely impact the rebuilding cost.

Supplementary costs can either be built in to the sum insured or paid in addition to the sum insured by the insurer.

b) Contents Insurance

Contents insurance protects your precious belongings – carpets, equipment, furniture and even your DVDs and CDs. Of course, you have spent a great deal of time and money in building your possessions, why not spend some time and thought to cover it adequately against damages.

1. How do I choose the right cover?

What would you like – new for old or cover up to a specific amount. Your choice will affect the premium you pay with replacement policies being more expensive than sum-insured ones.

If you are willing to increase your contribution to the pay out (by opting for a higher excess), the premium cost can come down. However, opt for a realistic amount that is payable in case you actually need to make a claim.

2. What all should I include in the cover?

Make an inventory of each room to ensure that you don’t miss out on any valuable item. Contents insurance will also cover your prized collections of coins, stamps and even veterinary expenses for your dog or cat injured due to an accident, earthquake or lightening.

Do not under insure your possessions. If you insure your possessions for only $30,000 and they actually cost you $60,000; when you make a claim, you will only get 50% of the total value of your goods.

Do check the inclusions properly, especially for valuables such as jewellery as most insurers only offer limited protection for such items.

Some practical tips to keep in mind:

1. Change can be good. Are you paying extra? Yes, many insurers offer cheaper deals to new customers. In fact, loyalty to your insurer could cost you.

According to a study conducted by Queensland University of Technology in August 2015, you could save up to $190 on your house and contents insurance by switching over to a different insurer.

Do not auto renew your insurance. Compare quotes from other insurers and ask if your insurer could match up; else, switch over!

2. Read the fine print.- This one is really important. Are you covered against only particular incidents or damages? Would you require a specific kind of cover? Does your policy cover damages if the house is unoccupied for a certain period of time? Ask all your questions and read each and every word of the policy before you agree to it.

3. As is where is You need to be honest with the insurer at all times – while making a claim or taking out a new policy. Do not insure items you do not have or describe them to be in a condition they are not. If you are caught, it can lead to serious legal implications.

Many insurers would require you to maintain the house properly and include safety measures such as a security alarm.

4. Claim settlement – It is best to report damage as soon as possible (you could call up the insurer to report damage). Fill up the claim form clearly with all the details. This would help the insurer and assessment officers to judge your claim accurately.

The payout can either be in the form of replacements, cash or a gift card (might be valid for select stores and up till a specific date).

c) Case Study

Tim and Lily recently shifted into their newly bought apartment. Sadly, they were burgled and lost some furniture and found their main door broken.

Luckily, as a precondition to their loan, they had to subscribe for home insurance and ended up taking a ‘home and contents’ cover. Though some time was spent in choosing the right cover, it came in handy and covered all their damages.

 

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