A home insurance policy, also known as householder’s insurance, is the best bet to safeguard your house because it not only covers the structure of your home but also all its valuable contents from different kinds of perils such as earthquake, terrorism, flood and burglary.
However, if you thought that you have ensured your peace of mind by opting for home insurance, which will take care of the most valuable possession of your life – your house — better do a reality check. Chances are that you may not get compensated adequately (or in some cases not at all) in the event of any mishap, particularly if you just missed out something before signing on the dotted lines.
This has already happened in many cases. Still consumers are not getting any wiser. They think that getting one’s house and valuables insured is as simple as buying a life insurance cover or taking a money back policy for one’s kid. Sadly, however, that’s not the case. According to experts, there are lots of precautions which need to be taken while opting for householder’s insurance. Here we take a look at some of them:
• Valuation of one’s property
In home insurance, the most important thing to consider is the valuation of one’s property and valuables. For instance, one should not insure one’s home at the market value or at the price one bought it, say, years back, as the price of construction materials like cement has gone up considerably.
Instead building and FFF (furniture, fixtures and fittings) should be insured on a reinstatement basis because in the event of a loss, both would have to be replaced at today’s cost of construction or replacement. This way, in case of any mishap, you would be able to replace your loss fully without bearing any depreciation.
•Insuring household goods
Household goods should not be insured at the purchase (book) price, as adjustment for depreciation would result in very little claim being paid. It is also not always easy to know the replacement cost. So one may have to use approximations and also keep a list of contents separately (not in the home) so that if there is a major loss, one knows what all the items at home were.
•Insuring electronic items
Today, with many homeowners owning expensive PCs, plasma TVs, DVD players, music systems, home theatre systems and other electronic gadgets, it makes sense to consider insuring these items for breakdowns. For this the EEI (Electronic Equipment Insurance) cover can be taken under a separate section in home insurance policy by listing the electronic items required to be covered and paying the necessary premium.
The sum insured should be the present day replacement value. EEI, in fact, is an ‘all risk’ cover as it covers electrical and mechanical breakdown, fire, accidental damages, water damage, etc, and can be taken for electronic equipment up to five years old. One point, thus, to be noted here is that it does not make sense to insure electronic equipment which are more than five-year old!
Also, while covering durables and other electronic and electrical appliances, it is important that description of the items covered, such as make, model and serial numbers, is mentioned in the policy.