Everything believes that their home is a safe haven where families can retreat – until accidents happen. Once disaster hits – be it a fire, burglary, hurricanes, and more – where would you get the extra cash to cover for all the damages? That’s where home insurance comes into play, and why it remains a necessity for all homeowners.
Why Homeowners Need Home Insurance
Many believe home insurance is a luxury, but it’s actually a prerequisite as not only does it protect your home against environmental damages and theft, it is also a requirement by mortgage companies for borrowing loans. Other major reasons for home insurance includes the following:
- Property Coverage – In cases of emergencies, home insurance gives you peace of mind knowing that any damages to the physical structure of your property are covered.
- Liability Coverage – Sometimes you need to cover for damages that are not dealt with you or your property. There are situations where other people can get injured and killed within your property. In that case, home insurance also extends to liability coverage and can pay for any personal legal responsibility that typically follows.
- Mortgage Lender Requirement – Lenders typically require insurance if you want to get a mortgage from a bank.
In case your home is destroyed, home insurance can also pay for expenses such as staying in hotels or rental apartments during the period of rebuilding your home.
What Does Home Insurance Cover?
A home insurance policy typically covers the following scenarios:
- Fire, smoke, wind, hail, lightning, explosions
- Falling trees
- Weight of ice, snow, and sleet
- Damage from a car, vehicle, or aircraft
- Water damage due to broken pipes
Of course, not all forms of damages are accepted under home insurance. Some perils that must be repaired from your own pocket include the following:
- Pollution damage
- Normal wear and tear
- Deliberate damage to the property
- Damage from pets, birds, rodents, or insects
- Earthquakes, landslides, mudflows
- Sewer floods
How Much Coverage Do You Need From a Home Insurance?
Home insurance doesn’t necessarily cover all the costs of damages. It depends on a number of factors, such as the following:
- Actual Cash Value (ACV) – ACV is typically lower than the market value of the damaged items, though premiums surprisingly come at a cheaper cost. Nonetheless, ACV involves coverage for possessions after accounting for the items’ age, minus the depreciation of value that occurs over the years.
- Replacement Cost Value (RCV) – This method does not take depreciation into account as RCV replaces items with similar products that have the same market value. Unfortunately, the premiums are higher by up to 10% than AVC since the coverage is equal to the full market value of your home’s damages.
As for your home itself, the market value depends on the real estate market. The insurance company reduces the amount of the claim once the RVC drops below 80%.
The Bottom Line
Many homeowners skimp out on acquiring insurance as it seems to be another paper that will be left to dust once it is filed away. However, once a disaster comes knocking at your property’s door, the time will come where home insurance becomes a necessity that can help ensure there is a roof over your head no matter what happens.
If you’re looking for home insurance excess protection in the UK, get in touch with us to see how we can help.