Benjamin Franklin famously said, “if we fail to prepare, we prepare to fail.” The quote seems applicable to many facets of our everyday lives, both at home and work, but perhaps one of the most obvious areas is when we look at the world of insurance. We all know that accidents can happen, which is why, for example, car insurance is mandatory across the United States (unless you live in New Hampshire – but that’s another story).
Although the likelihood of damage and injury to third parties is obvious in the case of car insurance, such a risk still exists when it comes to your home. And furthermore, the potential for covering loss or damage to your property pales into insignificance with your car insurance policy when compared with that afforded by your housing cover. That is why around 95 percent of American householders have comprehensive homeowner policies in place. The real shock is that five percent do not.
What is covered?
While there are a vast number of home warranty companies out there looking for your business, it is important to choose one of the top companies to be certain that the policy meets your needs, and you have cover where you need it most.
A typical policy covers three key areas, namely your home, your personal property and liability cover. It is worth examining each of these in turn.
Your dwelling
The basic and fundamental cover is for the building itself. This covers the cost of structural repair or even complete rebuilding in the event of some disaster, such as a fire, or an extreme weather event. If you have a mortgage or loan secured on your property, this type of cover is usually a prerequisite
As an example of how important this is it is worth looking at the wildfires that tore through Bastrop County, Texas, in the fall on 2011. Some 1,600 homes were either damaged or destroyed, of which 100 were not insured. That’s 100 families left with no roof over their head and no financial support in getting back on their feet. The total insured losses from the disaster added up to $325 million, which equates to losses of more than $200,000 per household. If disaster struck, would your household be able to absorb losses like that?
A policy does not just cover total losses such as these, however. Typically, it will also cover damage from factors such as smoke, wind, burst water pipes and vandalism.
Your personal property
Your home is one thing; all the things you have in it are another. Property cover will provide the money to replace items that are damaged or stolen.
Your property is worth more than you might think. Just look at the furniture, electronics and other bits and pieces that you accumulate as you go through life. Now imagine trying to buy all of that at once.
Property cover typically pays out either the actual cash value or the replacement cost of your items. Consider carefully which type of cover is best for you. To be clear on the difference, let’s consider an example. Suppose you have a 40” flat screen television that you bought for $850 two years ago, and today, the equivalent model costs $1,000.
If you are covered for actual cash value, the insurer will pay out what your two-year-old television is worth today. Perhaps around $500. If you are covered for replacement cost, then it will be $1,000.
Liability cover
Most policies include liability cover, an aspect that should not be underestimated in importance. Suppose a visitor or tradesman comes to your home, trips over your dog and falls down the stairs, breaking their leg. If they hold you responsible, you could be facing claims for medical expenses, not to mention compensation for pain and suffering, loss of earnings and so on.
Or suppose a roof tile fell from your home and landed on somebody’s car, or even worse their head – the
potential consequences do not bear thinking about.
Reducing risk and costs
The above examples give an indication of just how vital housing cover is for all of us. But finally, it is worth bearing in mind that there are some simple things you can do to reduce the risk of a problem.
For example, you can make sure your home is adequately protected against burglary by investing in good quality locks and security equipment. As well as this, consider getting a property guardian especially if you are planning to go on holiday.And by having your boiler serviced annually, you reduce the risk of accidents and leaks, and their consequences.
Not only do measures like these provide peace of mind and reduce the risk of disaster striking, they will also reduce the premium on your insurance cover.
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