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Home insurance essentials

YOUR home is most likely one of the biggest investments you would ever make. If you had taken a loan for your home, your bank would normally insist that you have some kind of insurance protection against certain losses and damages.


What you would want to avoid is under-insuring your property and its contents. This could prove costly should anything untoward happen and you find that what you can claim is inadequate to cover your losses.


So how would you know if you are adequately protected?

There are two types of insurance for homeowners: basic fire policy and houseowner policy. A basic fire policy provides cover for the building and its contents such as household equipment and fixtures and fittings, in the event of loss or material damage caused by fire, lightning or explosion.


A houseowner's insurance provide a more comprehensive coverage than a fire policy, and is especially suited for owners of residential properties. It protects against loss or damage caused by all the perils covered by the fire policy except riot, strike and malicious damage. In addition, houseowners insurance covers theft accompanied by forcible entry, loss of rent if building is damaged and rendered uninhabitable, and the insured's liability to the public in respect of bodily injury and damage.


Both the basic fire and houseowners policies can be extended to cover additional perils.


If you are renting your home, consider taking up householder's insurance. Some landlords may have only insured the building but not its contents, which a householder's policy would cover.


How often should you review your insurance coverage?

To avoid being under-insured, do a yearly review of your property and its contents before renewing your policy. Keep proper records for easy reference in the future. Keeping detailed information on the insured items, such as description, date of purchase and price, would be handy in the event of a claim and you want speedy settlement.


Finally, take into consideration any depreciation of the assets you are insuring, as you do not want to pay more premium for your coverage than necessary.


When purchasing insurance for your home:

DO

1. ensure that you have insured your property adequately, taking into account the renovations and enhancements made to your property.


2. disclose fully all material facts and information required in the proposal form.


3. deal with an insurance company you can trust, that can provide good security, have a good reputation for efficient handling of claims, and prompt with their documentation.


4. read and understand all the terms and conditions of the policy.


5. be punctual in the payment of your premiums as your policy may be cancelled if payment is not received within the stipulated time.


DON'T

1. sign a blank proposal form.


2. over- or under-insure your property.


3. hide true details or information required in the proposal form.


How to know if you are under-insured

You have under-insured your property if:

* you have based your insurance on the current market value instead of on replacement cost.


* your current insurance policy does not reflect increases due to inflation or appreciation in value.


* you have not taken into account any recent improvements to your home, such as an additional room or remodeled kitchen.


* you did not take up additional coverage for valuable items such as artwork, jewellery, antiques or collectibles. An `All Risks' insurance policy would provide cover for the valuables against any loss or damage, although there are some exclusions. Usually an independent valuation would also be necessary for the more expensive items.
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