Make Sure You Home is Properly Covered for a Disaster
It is without doubt the case for most homeowners that their property is the biggest asset that they have, therefore it is important to safeguard it from any disasters that might occur.
To do this, homeowners should ensure that their insurance is always up to date and that their policy covers everything that they are ever likely to need, as well as provisions for any new additions to the property.
Although the country is still gripped by a financial crisis and the building industry is in turmoil, this has not forced the cost of construction down. In fact, the opposite has happened: as constructors look to stay in business, they have raised their prices. This means that construction work is more expensive than ever.
Four questions to ask your insurance company – and more importantly yourself:
1 Is my insurance policy cover sufficient to completely rebuild my home?
Although you might not think it will ever happen to you, every day people are forced to rebuild their entire home due to a variety of different reasons. One problem is the fact that many people simply don’t take out enough insurance to cover this eventuality, either due to the fact that they completely underestimate the costs involved or because they only take out the minimum amount that they have to. So, Make sure that you look at the following when arranging your insurance cover:
Replacement Cost. Nearly all insurance policies will include replacement cost, and this will pay for a property to be repaired or replaced using the same materials used in the original build.
Extended Replacement Cost This is the same as standard replacement cost, but it means that the cost can be about 20% more than the limit of your policy, therefore meaning that you are covered if costs of materials or labour suddenly rise.
Inflation Guard This is extremely important, as it will protect you against rises in inflation. Basically it means that it will adjust the costing to take inflation over the previous years into account.
Ordinance or Law Coverage New rules and regulations are always being added when it comes to the construction of new properties and these often cost money. This type of coverage will mean that you do not have to pay to ensure that a property meets any new standards laid down.
Water Back-Up This means that your property is covered for damage caused by drain or sewer back-up. It is usually offered as an add-on by insurance companies.
Flood Insurance Most insurance policies include coverage for a number of different eventualities, but they do not always cover flooding. This is obviously a huge risk, as flooding accounts for a massive amount of damage every single year, so it must be included within any insurance policy, regardless of the extra cost.
2 Does my Insurance Cover the Replacement of all My Possessions?
Most insurance policies do cover personal possessions, but often in reality they only cover for about 50% of the insurance value on your home. This means that many people lose out, as their insurance policy is not large enough to claim for everything that they have lost. Basically speaking, if your insurance policy is worth £100,000, then you will only be able to claim £50,000 for possessions.
Conducting an inventory of all the items in your home is the best way to decide whether your insurance policy is sufficient. Only after you have done this will you know the exact cost of replacing them all should they be destroyed. It is also recommended that you keep this inventory safe, as in the event of you having to make a claim it will be an invaluable reference.
There are two ways to insure possessions – you can insure them through a cash value policy or a replacement cost policy. A cash value policy will only pay out what the insurance company think s the item is now worth after they take into account depreciation and other factors, while a replacement cost policy will give you the full amount needed to replace the item with something of comparable quality.
3 Can I Cover Additional Expenses?
When a disaster strikes, there are a number of additional living expenses that you will need to take into account. These include the cost of taking up temporary housing somewhere else, as well as the cost of any hotel bills, meal costs due to having no kitchen and any transport costs associated with living in a different area. It is important to note though that it won’t cover you for all expenses – only the ones that are above what you would regularly spend. For example, if it usually costs you £25 a week in bus fares to get to work, and when you relocate it rises to £35 a week, then the insurance company will give you £10 a week, not the full £35.
The amount of coverage that insurance companies provide for living expenses does vary, but the average is about 20% of your overall insurance policy value. The length of time that these are applicable for also varies massively from company to company.
4 Does my Insurance Protect my Assets?
Although it won’t be at the top of your list of priorities should a disaster strike, there is the chance that someone might want to begin legal proceedings against you for damage to their property or for injury to themselves or a family member. This means that it is very important to have some kind of liability insurance on your policy, to cover the cost of any amounts that you have to pay to those affected by the disaster at your home.
