Insurance
Accidents do happen. You should take steps to fully insure your home possibly your most valuable asset to avoid potentially heavy financial loss.

Accidents do happen

While we never like to think about it, accidents do happen. It's important that you think about your insurance needs in relation to your home, possibly your largest investment and asset, to prevent being hit by catastrophic financial loss.

The two key areas to consider are:

  • Home Insurance (the building) and
  • Contents Insurance (your possessions).

But as well as home and contents, you should also think about the cost of additional living expenses if your home is damaged and you have to live elsewhere during repairs, and your liability to others.

It's recommended that you shop around for insurance because policies and their coverage vary widely. For instance, you may require coverage of your legal liability for injuries to other people while on your premises. As always, with any legal document, check the fine print.


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Home insurance

Basically, you need enough insurance to cover the cost of rebuilding your home at current building costs. This doesn't include the cost of the land but would cover the cost of clearing the site.

For a quick estimate of the amount of insurance you need, multiply the total area of your home by local building costs per square metre. To find out building costs in your area, call your local real estate agent, builders' association or insurance agent.
Some things that will determine the cost of rebuilding your home include:
  • Local building costs;
  • The size of your home;
  • The type of construction: frame, masonry (brick or stone) or veneer;
  • The number of rooms;
  • The type of roof;/span>
  • Other structures on the premises such as garages;
  • The quality of fixtures and fittings, especially bathrooms and kitchen;
  • Fireplaces, exterior trim and other special features like arched windows; and
  • Changes to building codes since the home was first built.

 
Most home insurance policies cover replacement cost for damage to the structure. This policy pays for the repair or replacement of damaged property with materials of similar kind and quality. There is no deduction for depreciation - that is, the decrease in value due to age, wear and tear and other factors.

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Older homes

If you own an older home, you may not be able to buy a replacement cost policy. Instead, you may have to buy a modified replacement cost policy. This means that instead of repairing or replacing features typical of older homes (like plaster walls and wooden floors) with similar materials, the policy will pay for repairs using the standard building materials and construction techniques in use today.

Insurance companies differ greatly in how they insure older homes. Some won't insure them for the replacement cost because of the expense of re-creating special features like wall and ceiling mouldings and carvings. Other companies will insure older homes for the replacement cost as long as the dwelling is in good condition.

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Additional living expenses

This pays the additional costs of temporarily living away from your home if you can't live in it due to a fire, severe storm or other insured disaster. It covers expenses incurred while your home is being rebuilt.

Make sure you know exactly how much coverage you have and how long it will be in effect.

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Contents Insurance

Would you have a detailed recollection of all of the possessions you have accumulated if they were destroyed by a fire or other disaster? Having an up-to-date inventory will help you get your insurance claim settled faster and help you get the right amount of insurance.

Start the process by making a list of your possessions, describing each item and noting where you bought it and its make and model. Keep all of your sales receipts or appraisals together. For clothes, count the items you own by category - trousers, coats, shoes and so on - making notes about those that were particularly expensive. For major appliances and electronic equipment, record the serial numbers (usually found on the back or bottom).

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Valuable items

Valuable items like jewellery, art work and collectibles may have increased in value since you acquired them. Have them regularly appraised to make sure that you have the right value for the insurance.

As well as the written list, take pictures of the house, rooms and important individual items. This is now so much easier with digital photography. Make sure that you get everything, including the contents of shelves and draws.

All this information must be kept safely, preferably away from your home. This will ensure that you have a record should something catastrophic happen to your home. When you make a significant purchase, add the information to your inventory while the details are fresh in your mind.

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PropertyCover - Innovative Insurance Products