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Thursday, December 11, 2008

Choosing Home Insurance - Home Property Contents Cover

Learn More About Taking Inventory Of Your Valuables

Are You Not Sure Of What You Need To Look For In An Insurance Policy?

Are You Looking For A Simple Explanation Of The Details?

Most people will agree their home is their largest single investment, they will ever make in their lives. Not just an investment, it is the family home where our hard earned possessions, are stored and cherished.

So Why Do So Many Of Us Never Bother To Fully Understand The Insurance Policy, Until Making A Claim?

Why Are So Many Homes Found To Be Under-Insured, At The Time Of Claim?

The effects of loss can be easily minimised, on your family home and contents, by spending time to understand your insurance policy. Learning how it specifically addresses your needs, in the event of a loss. Your home insurance policy will be made up of different types of cover, for items in the home, depending on factors such as their worth, age, portability, business use and timeout of the home. You will often pay a single premium amount, for a combination of cover listed in the policy.

Purchasing insurance is like any other consumer product, you need to shop around and compare policy cover and conditions, prices, claim submittal procedures, and complaint information procedures. Do not forget to do a little extra research of your own. Relying on the word of someone else, including an insurance supplier, as to what is the 'best coverage' for you, may not be your best option. Find the answers to your needs, and how specific insurance cover can best meet these needs. Comparing policies in your own time, after the information has been collected, will help determine the best product for you.

An informed decision is needed, for the correct purchase of cover to suit your needs, and this takes planning and time. It is your investment, your families home & contents, cherished for their sentimental values, that you are looking to protect. You must be sure the insurance supplier, has your best interests covered.

Policies will have an extensive [PDS] - Product Disclosure Statement, often with supplementary documents, these both need to be fully understood before making a descision.

Purchasing Insurance.

In Australia insurance is sold either via the insurance company, their agents or brokers. A broker will often represent a number of companies and should be able to get a good competitive price. Some companies though, can also offer good deals as they deal direct with the consumer. Prices can vary greatly, between insurers and brokers. Take time to shop around! Payment plans and instalments will differ from company to company, so ask for details. Make sure you ask for discounts, as these are often available or even negotiable! Discounts for burglar alarms, home inventories, special locks, fire protection devices such as smoke detectors, fire safes, alarms and sprinklers are common. Often the number of policies you hold with an insurance supplier, will increase your % discount.

Policies often come with a 'basic excess', [the fee you pay if you claim]. Adjusting this basic excess to a higher value than the normal, can decrease your policy premium.

Policies can have a 'cooling off' period such as 14 days, in which time you have the option to cancel the policy.

What Does The Typical Homeowners Insurance Cover?

Typical homeowners coverage insures your dwelling, other structures and contents, and may cover against losses such as:
  • Fire, lightning, hail, windstorm.
  • Breakage of glass.
  • Explosion.
  • Riot or civil commotion.
  • Theft.
  • Aircraft.
  • Vehicles.
  • Smoke.
  • Vandalism & malicious mischief.
Specialised cover that provides additional protection, for your home and contents beyond the standard coverage, is available with most policies. Ask your insurance supplier about available endorsements to extend coverage. Endorsements to coverage, such as building code upgrade, can greatly add to your protection in a loss. With the increase and dramatic effects of climate change, consider additional cover for earthquake, flood insurance and rainwater run-off, as these types of hazards are specifically excluded, in most homeowners insurance policies.
Your policy may also cover 'loss of use', including increases in living expenses due to fire or other insured losses. Familiarise yourself with the coverage provisions for living expenses. This information needs to be included with your disaster plan in case of emergency.

For injuries or damages to others caused by you, a member of your family or pet, you will need liability coverage. This will cover medical expenses to non-family members injured at your home.

Exclusions are part of your policy and should be fully understood before agreeing to the policy. Earthquake, flood, mould, earth movement, and 'wear and tear' are some of the perils that are usually excluded.

Tenants (renters) insurance can cover the loss of personal property, and loss of use due to the above-mentioned perils, and may include liability and medical payments coverage. Most insurance suppliers have additional 'investment home insurance', covering the landlord for loss or damage by fire, theft, vandalism and other events.

What Is The Correct Insurance Replacement Value For My Home?

The insured replacement value of your home, is the cost of rebuilding it if it was lost. Additional costs that may be covered are:
  • The cleaning of debris.
  • The re-installation of services.
  • Temporary accommodation.
This value needs to be reached carefully and accurately, to make sure you are not going to be out of pocket or under-insured. The insured replacement value often has nothing to do with purchase price, or the current market value of your home. Homeowners insurance does not normally cover the land value of the property, nor the real estate value. For help in calculating the rebuilding cost of your home, most insurance companies have on-line calculators, literature or offer help over the phone. You will need to know the size of your home in square metres, and the type of construction, being brick, weather board or fibro. A simple calculator will multiply the cost per square metre, for the construction type, by the size of your home. Added to this will be other costs. You may wish to contact a local builder, to determine the current cost to rebuild your home. If this information differs greatly from the insurer's figure, then make sure the builder states the estimate in writing. Calculators and formulas used by companies often differ, because they are unique for each company. Different insurers therefore, may suggest or require different policy limits for your home.

The following information can assist you in deciding, if the limit set by your insurance supplier, accurately reflects the price it would cost to rebuild your home, in the event of a total loss.
  • Contact your insurance supplier for assistance in evaluating your policy limit.
  • Document any discussion in writing.
  • Review your policy on purchase and renewal.
  • Changes to your home and contents will need to be submitted to your supplier in writing.
  • Know the replacement cost of your home, familiarise yourself with the building materials in your home including construction type special features.
  • Keep informed with the current building costs in your area.
  • Contact local builders and ask what the current price per square metre is for a similar home.
  • Keep accurate records of updates, renovations, improvements and purchases of new contents to your home.
  • Save receipts and samples of materials used when possible and contact your insurance agent or broker to increase the cover when appropriate.
Additional Information

At renewal time your insurance supplier will not know of additional information, unless you inform them! Contact your insurance supplier to request a comprehensive inspection of your home, if you believe your policy limits may be inadequate. You may be charged for this service. If you believe that your policy limit is undervalued or overvalued, and you have submitted documentation in writing to your insurance supplier to raise or lower the limits and your request is refused, then contact your local insurance council. In Australia this is the [ICA] - Insurance Council Of Australia.

How Do I Go About Insuring My Valuables?

The 'contents' limit is generally around 50% of the home amount, however this is a guideline only, as the most competent source on the replacement value of your personal possessions, is YOU! Be sure to take into account all of your personal property when calculating the contents limit. Read and understand the limited coverage amounts for specific types of personal property such as:
  • Jewellery.
  • Fine Arts.
  • Silverware.
  • Antiques & Collectibles.
  • Electronic Items.
  • Firearms.
  • Computer HW / SW - Camera - Video.
  • Business Property Used At Home.
  • Money.
The limited coverage amounts for specific types of personal property, are included in the overall contents limit, and represent the maximum paid, for that specific type of personal property. Therefore, it is very important to add an endorsement (sometimes referred to as a "rider" or a "floater") to coverage which specifically schedules and takes into account the value of personal property, that you may own above the special limits.

Contact your insurance supplier to discuss how to adequately cover any personal property that is valuable, falls above the limits, or is in any way out of the ordinary. Also make sure to take into account, commonplace household items when calculating your contents limit. Often people concern themselves only with the big ticket items purchased, and neglect to account for all the many things you need to run your household, such as small appliances, kitchen utensils, linens, window coverings, and sundries. Remember, personal property also includes clothing, shoes, accessories, and personal items.

Two major problems suffered by homeowners on their residential property / homeowners insurance policies in the Canberra & Victorian fires were:
  • Many of the homes were under-insured, insured for amounts inadequate for rebuilding & content replacement.
  • The problem of increased cost of construction, was evident in many situations.
Be aware of the cost of building code upgrades as the homeowner will have to comply with new building code requirements in case of a rebuild. In some instances the difference between the dwelling limit and the code upgrades can be a significant amount. Also, the extreme heat of some fires (and new building code requirements) may necessitate building new foundations along with appropriate debris removal. This situation can be easily avoided by knowing your building limits.

Everybody wants to protect their property to the best of their ability. Home owners insurance is a vital component to the protection of property. By knowing and understanding the coverage and limits of the policy, and by making sure that values are current, you will greatly add to your family's peace of mind in any loss situation.

How Do I Know If My Policy Will Completely
Replace My Home If It Is Destroyed?

Policies in Australia are of the 'replacement cost' type with the chances of being able to completely rebuild your home being increased compared to basing those costs on the market value of the home. However, there are many types of replacement cost policies, so you need to be careful to purchase a replacement cost policy that best meets your needs. A policy cannot be sold as a "guaranteed replacement cost" policy unless it will pay to completely rebuild the home. Other types of replacement cost policies will pay your policy limits, plus a certain percentage above those limits. Some policies do not have building code upgrade coverage.

Cities and counties periodically change their building codes. Unless your policy has this coverage, your insurance company may not pay for changes you may need to make to the structure of your home to bring it up to current building codes.

Your insurance supplier can assist you in establishing a limit, that is adequate to rebuild your home. It is important to update that limit periodically, to maintain a limit that reflects current construction costs. You may want to ask your insurance supplier if they automatically review or increase limits on a regular basis, or if they offer an automatic inflation guard option, that increases limits according to current inflation information.

Read your policy and your renewal declarations carefully. Contact your insurance supplier if you are unclear about anything. A situation you do not want to experience, is where after a loss you discover you did not have the right cover!

Remember, if you only shop by comparing prices only and not by comparing coverage, you are doing yourself a disservice. Your home is one of the most important purchases you will make. Take the time to get the facts straight before you purchase homeowners insurance. It may be one of the best decisions you make for yourself and your family.

Helpful Information.
  • Take the time to shop around for homeowners insurance.
  • Compare prices, service, and coverage
  • Provide the most complete and accurate information to your agent or broker, when requesting a premium quote, or completing an insurance application.
Read all applications or finance agreements before signing. Read them again after you have filled them out completely, and before you sign in order to check and see everything is correct. Never sign a blank form or something that you do not understand. Keep a copy of all signed documents in a safe place for your records.
Review and read your policy when you receive it. Do not file it without checking to see that the coverage, limits, premium, and other information are correct. Also read through the policy carefully, to identify your rights and obligations and the company's rights and obligations under the terms of the policy.
Keep a home inventory of personal property, listing all of the items you own, the dates purchased, and the price. If possible, take pictures of important and valuable items. You may want to record your home and possessions onto DVD. Keep these records in a safe place away from the home, preferably in a safe-deposit box. There are Home Inventory Services that will do this important task for you professionally, confidentially and quickly save you the time and stress. Periodically update your inventory and appraisals.

This will all help you to file and settle a claim quickly and efficiently. It is hoped you will never experience a loss to your home. However if you do and you are prepared, you should be able to make a quick recovery, and restore your home and standard of living to what it was before the event.


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