Is Your Home Adequately Insured?

After taking up a house owner policy for your house, you think you are fully covered in the event of a fire? I must say that most likely it is not. There are three aspects of a house owner policy to consider if you want to be fully covered:

·         Sum insured

·         Additional perils

·         Other expenses

Sum insured:

You should insure your property on a reinstatement basis instead of indemnity because coverage on reinstatement is the actual cost to rebuild your house after a fire. You do not want to insure the actual price you previously paid which is insufficient now due to inflation. You have to find out from a reputable building contractor the cost involved to rebuild a similar house that you are occupying excluding the cost of land. If you do not insure fully you will be compensated proportionately.

As an example, the cost to rebuild a similar house of yours is $200,000 and the sum insured of your houseowner policy is only $150,000 you are deemed to be self-insuring the difference. During a fire, say, you suffer a loss of $10,000, you will be paid:

Sum insured $150000 x Loss $10000/Rebuilding cost $200,000 =$7,500  

Additional perils

A normal house owner policy will cover your building, including its fixtures and fittings, garages, walls, gated, and fences. The main perils covered are:

·         Fire, lightning, and explosion caused by the gas used for domestic purposes.

·         Aircraft damage

·         Explosion (other than gas used for domestic purposes)

·         Road vehicles or animals

·         Bursting or overflowing of water tanks or pipes,

·         Electrical installations

·         Windstorm, tempest, earthquake, volcanic eruption, and flood

·         Theft with violent/forcible entry or exit

·         Loss of rental

·         Liabilities to third parties for accidents in your property

You need to extend the coverage of the house owner policy to include the following:

·         Riot, Strike & Malicious Damage

·         Subsidence and landslip

These are excluded from a normal house owner policy, In case of damages caused by, say, riot, strike, and malicious damage your houseowner policy is not enforceable.

Other expenses

After a fire, you have to think of the additional cost involved in removing debris. To rebuild your house will also involve architects, surveyors, and consulting engineers’ fees. These are not in your standard houseowner policy. Therefore the sum insured for your houseowner policy you have to add these expenses.  

Conclusion:

You should take up both houseowner and householder policies to obtain a comprehensive cover for your home and its contents. However, you have to make sure that the sum insured is sufficient. Find out what perils are excluded in the policy that you need to extend coverage.