The Importance of Property Insurance
What is property insurance?
How does it work?
Property insurance is in the form of a written contract, referred to as a ‘policy’. It is a legal document that binds the insurance company and the policyholder (you).
You, the policyholder, have to pay a small amount, referred to as a premium, to the insurance company to acquire compensation if there is any damage or mishap to your property.
The nature of the damage and losses covered by the insurer will be there in the contract; therefore, you must go through the fine print of any policy thoroughly before narrowing it down to the choice of an insurance company.
The market is replete with the number of insurance companies providing competitive coverage. To make a wise investment, you have to make a comparative analysis of different policies offered by insurance companies.
For whom is it applicable?
Property insurance is for anyone who owns a costly, premium property of immense value. You are forced most of the times either by mortgage contract or law to maintain property insurance. For instance, all the states of India mandate drivers to carry motor vehicle insurance, typically in the form of liability insurance.
Home insurance plans offer coverage of the liabilities that arise out of damages to the house and/or to the contents due to man-made reasons like loot, demolition, etc. There are many salient features of a home insurance policy and its coverages that you can take advantage but first, know their offerings.
Types of coverage
- Flood damage
- Maintenance damage (electrical wiring, worn-out plumbing, roofing, heating units, etc.)
- Sewer back-up
Policies are usually composed of contingencies that are ‘sudden and unexpected”. A leak that occurred over several months would not be covered. Also, a roof that caves in from age rather than weather will not be covered.
Property insurance is for two kinds of coverage: Hazards and Liability.
Hazard insurance provides cover against damages that may occur because of theft, vandalism, fire, and other mishaps. It could offer cash value or the replacement value.
Liability insurance offers covers against accidents that may occur on the property. For instance, there is coverage of medical bills of a person injured while working on your property.
Types of coverage
- Check whether the insurer offers cash value compensation or the replacement value.
- For protecting jewellery, you need to include a floater, an add-on to your primary policy.
- Certain premium factors may impact insurance:
- Do you live in an area plagued by hurricanes and tornadoes?
- Are you a smoker?
- What is your credit score?
- Do you own a swimming pool?
- You may be at high risk because of these factors. Based on these, the insurance company will charge you accordingly.
- Steer clear of insurers offering rock bottom rates. Check the reputation of the company and don’t take the word of its sales personnel.