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The Basics Of Home Insurance

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Because of any unexpected event, your house or your possessions may get damaged, stolen, or lost. You need to safeguard your home from such damages. How do you do that? Home insurance protects your financial interest in such situations.

Home insurance basics

Source: Freepik

Insurance in any field is a necessary aspect to safeguard an owner against unforeseen situations. home insurance is one such insurance that every house owner should rely on these days.

Here, in this article we will cover the basics of a home insurance policy to guide you while you invest in it.

Why do you need home insurance? 

Home insurance works for you round the clock, whether you are staying at the home or even when you are not at home.  It protects your home and its possessions inside and outside, making it a much needed investment.

What do you get under home insurance?  

The following aspects are covered under a home insurance plan-

  • Protects your home from physical damage. 
  • Protect home and its contents or loss of your possessions from theft. 
  • Contents stolen from your vehicle. 
  • Harm or injury caused to the people visiting your home. 
  • Damage to someone else’s property caused by you 
Insuring your house
Source: Freepik

Let’s assume a fire breaks out in your home caused by malfunctioning electrical equipment damaging your neighbor’s home. If the person claims you to pay for the cost of medical treatments, then home insurance can be of great help in such a situation. 

What are the home insurances you can choose from? 

Here are some of the home insurances you can choose from:  

  1. Comprehensive: This insurance covers the risk to your property or home and its contents. It does not cover exclusions (for example, flood, earthquake) as mentioned in your policy. 

Home insurance does not cover two types of risks. First, the uninsurable perils (predictable events), such as damage caused because of floods in floodplain areas. These risks include the ones named in your policy as exclusions. 

2. Basic or Named Perils: The coverage provided here is less than the comprehensive policy. This policy covers only the specifically mentioned risks. If you have mentioned floods as a risk to your home, then your insurance covers the damage caused by floods only and not earthquakes, fire, or hurricanes.

If you want to get covered for these damages, then you will have to mention them in your policy. We know this as Standard Policy. 

3. Broad or broad form policy: If the comprehensive policy is costing you too much and the basic policy is not suitable for your needs, then the next option for you is the broad policy.

It is a kind of mid-priced compromise. The coverage falls between the comprehensive and standard policy. 

4. No frills policy: This policy offers the least coverage. We can take this insurance for those homes which do not meet the standards for insurances usually.

You need to be clear with your insurance agent and your broker regarding what it covers when buying this type of insurance. 

5. Personal property coverage: This type of insurance protects your home, car, or other personal possessions. For this coverage, you must first figure out certain aspects regarding the possessions you want to get insured for the future perspective.  

What are the factors affecting home insurance coverage? 

House protection
Source: Freepik

When you buy home insurance, you need to provide certain information regarding the house. If you cannot meet the policy conditions, it may affect your coverage as well.

Here are some factors you should try to avoid to not let the insurance become invalid:  

  • Doing renovations without informing the insurance company. 
  • Staying away from your house and not checking if the property is fine.  
  • Not conducting required repairs which cause further damage to the property.  
  • Running a home business without informing the insurance company 

How are the premiums calculated?  

There are many factors based on which the insurance company decides how much amount of money you need. Depended on these factors, they calculate the amount you need to spend for a certain period to buy insurance. Some of the most key factors related to premiums are: 

  • Type of house and its contents. 
  • Location and crime rate of the area. 
  • Type of policy you choose. 
  • Claims did by you in the past. 
  • How far the fire station is from your house. 

What are the home insurance settlement options?  

When you make a claim, you need to pay the deductible. The claim settlement amount depends on the type of insurance you are having and the amount of deductible you need to pay.  

There are two types of settlement options you can choose from:  

  1. Actual cash value: in this type of settlement, you will receive the cost of the item when it was new, excluding the depreciation.  

2. Replacement value: in this type of settlement, you will receive the actual cost of the item destroyed or harmed.  

Apart from the home insurance, there is also the condominium and the tenant’s insurance.

Condominium insurance differs from home insurance in the sense that it covers the cost of damage done inside of your unit and your storage locker. You must buy the tenant’s insurance if you are renting a house or apartment. 

If anything happens to your house, with the home insurance you can stay assured and have a sigh of breath. However, home insurance is not a maintenance plan, and you need to be prepared to cover certain costs for the house. 

to conclude, now you know all the basics of home insurance. You must do ample research and make a thorough decision regarding purchasing home insurance.   

Are you planning to share an apartment with your partner and have questions regarding the insurance policy covering your partner? The topic on ‘Will my tenant insurance policy cover my partner if they move in with me?’ will help more.  

References: 
https://www.canada.ca/en/financial-consumer-agency/services/insurance/home.html
http://www.ibc.ca/ns/home 
http://www.fsco.gov.on.ca/en/insurance/brochures/pages/understanding-home-insurance.aspx 
http://www.ibc.ca/qc/home/types-of-coverage 

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