Homeowner’s insurance is one of the most overlooked aspects of a property purchase however, it is of the utmost importance as sadly, homeowners are at risk of property damage due to unfortunate/unforeseen circumstances.
What is Homeowners Insurance?
Homeowners insurance is a protective policy against property damage or loss caused by fire, strong winds, vandalism and theft. Though it is not an obligation, many banks will only grant mortgage to buyers who apply for insurance. This is to merely ensure that the bank's investment is protected should any of these unfortunate events occur. Note: the banks cannot force you to utilize their service provider
There are 3 main types of homeowners insurance which include:
- 1. Homeowners building insurance – This type of insurance provides cover for the building structure against accidental property loss and damage caused by fire, storms, or vandalism. The insurance usually covers repairs, property rebuilding and sometimes even hotel stay during repairs to your home.
- 2. Home content insurance – This type of insurance provides cover for your personal belongings in the event that they are damaged, stolen or destroyed. This includes furniture, jewellery, clothing, electronics, gadgets etc. cover in the event that they are damaged or lost.
- 3. Personal liability insurance – This type of insurance covers you against third party claims for injury incurred by visitors on your property, loss or damage of visitors’ belongings on your property, accidental death as well as illness of visitors on your property.
Replacement Cost versus Cash Value
There are two types of homeowners insurance cover methods. These include:
1. Replacement Cost Policy – With this policy, the insurance provider will pay out the amount you used to replace damaged or stolen goods. You will be required to keep the receipt for the purchased goods as proof.
2. Cash Value Policy – With this policy, the insurance gives you a cheque payment of the market value of your damaged or stolen good minus depreciation. The depreciation amount is determined by the insurance provider. Advantages of homeowners insurance:
- Provides peace of mind
- Provides protection for your investment
- Provides protection for personal belongings
- Lowers cost of repairs, even rebuilding if needed
- Covers you against third party claims
For more property related advice, contact your trusty Intro Real Estate Agent, it’s the right choice.
Note: the above information is a general guideline. All claims are subject to the terms and conditions of your specific service provider.