Insurance is a fact of life.There are many different forms of insurance and not all are created equal nor are they applied universally when a claim is made.In recent years, this last fact has become something of an issue with homeowners who are trying to make a claim.
First of all, you only buy insurance for a purpose, hopefully in the knowledge that you will never have to make a claim.If one has the resources to avoid insurance, then purchasing a policy becomes something of a moot point assuming the individual is investment savvy and dedicated to this as a hedge against making a claim on a purchased policy.
The fact of the matter is that if you have a mortgage, you will be obliged to purchase insurance that will protect the lender’s investment; your home.Don’t forget that they have your property as chattel against default of the loan so they also want to be assured that in the event of a catastrophic loss such as fire, they are going to be reimbursed the balance owed on their loan.This is part of every standard mortgage agreement.
So the first thing they want is property insurance.That is, as I said, coverage for loss of the property itself.The second thing they want is to be assured that a third party doesn’t make a claim of ownership if you get sued for negligence.What this means is suppose a neighbour is walking on your unshovelled sidewalk in the winter and slips and falls.They are hospitalized with head or spinal injuries that will require life long medical care.You can be sued for negligence because you failed to care for your property resulting in the injury or even death of another.This is called liability insurance.
These two coverages are essential and in the worst case scenario, cheap if a major claim has to be made.Still, while the second coverage for liability is the homeowners discretion for coverage above one million dollars (and it is inexpensive for the additional) the first coverage of loss is where most people make their mistakes because they either have excess coverage resulting in higher premiums or insufficient coverage.
It is to the homeowner’s benefit to have an appraisal of the property done every five to ten years to ensure that realistic value of replacement is given to the insurance company.Replacement value is not the same as property value or resale value.
Assume your home is totally destroyed in a fire.Replacing it will require that the property be cleaned prior to construction, any impediments to construction such as power lines are moved or failing that, insurance is available for damage to them, reconstruction is done to the same standards as the original property before the fire to name just a few.Most homeowners are unaware of the actual replacement value and as a result are usually insufficiently covered for this loss.
You will also want coverage for your contents.This means replacement of all appliances, clothing, electronics, jewellery, collections etc.This can quickly add up to major value and because of this, your policy is best written with a replacement value rider attached.If not, you could find your contents being prorated and you could easily be on the hook for most of the replacement cost.Again, appraisal is to your advantage if the contents exceed minimum coverages and for specialty items such as jewellery, you should have a separate rider.However, to save money in this area, a safety deposit box at your bank is a very good idea.Jewellery riders can be very expensive.
Outbuildings such as garages and sheds should be covered.A shed?You bet.Suppose it is destroyed, along with your tools, snow blower, lawn mower, Christmas ornaments etc.It can add up to some serious value.
Make sure your home is insured, but be smart about it.Get an appraisal first then get quotes from multiple vendors.Do not accept the bank’s offer just because they are now carrying insurance.Make them quote like everyone else before you buy.It is to your advantage and it is your money.
Other insurances you can be enticed into buying are life insurance and disability insurance.Here again, beware. If they are offering the insurance with guaranteed coverage without proper medical examination, you may want to think twice.Many banks are insuring their clients this way.It is called back end underwriting and many clients are finding out after the fact that their claims are being denied.It is a loophole in the insurance and financial services law and it is costing people to lose their homes in the worst situations.Again, get quotes then go to your lawyer and get them reviewed and explained in plain English.
Insurance is a good thing as long as the claims are settled quickly and without litigation.Protect yourself by being knowledgeable about what you are buying.