Things you need to know about home insurance
If a child, a spouse, a life partner, or a parent depends on you and your income, you need life insurance. – Suze Orman.
Buying a house is one of the most crucial decisions that you will make in your life. When you buy a home, your utmost desire is to make sure that the house is a safe investment and a source of financial security for you and your family members.
One of the best ways to protect yourself from financial losses and risk is through home insurance. It not only provides you with home security but also helps you to preserve your assets.
However, most people have little to no knowledge about home insurance. A lot of us consider insurance as something difficult, stressful and too complicated. People are usually unaware of what’s covered in the insurance, how much they need and what kind of policy they should purchase.
In this blog, we will discuss things you need to know about home insurance. These pointers and essential information will help you understand home insurance in Pakistan and how it works in the country.
To know more about things you need to know about home insurance, keep on reading.
What is home insurance?
According to Investopedia, homeowners insurance is a form of property insurance that covers losses and damages to an individual’s house and assets in the home. The policy usually covers interior damage, exterior damage, loss or damage of personal assets, and injury that arises while on the property.
THINGS YOU NEED TO KNOW ABOUT HOME INSURANCE
Following are some of the most common things you need to consider when purchasing a home in Pakistan.
Do your research:
Before investing your hard-earned money in any insurance policy, make sure you read between the lines and grasp as much information as you can. Many attractive insurance policies in Pakistan look perfect at first glance. However, they might not be relevant to you.
Read about home insurance and how it works. Read books, magazines, bank pamphlets, podcasts, watch youtube channels etc. All these sources come with valuable information that can help you to understand insurance.
Also, make use of your connections and use the power of networking to Things you need to know about home insurance understand the pros and cons of home insurance in Pakistan.
There are certain things in home insurance that you need to understand. First of all, you need to know about dwellings. Dwellings cover damage or loss to the actual building you live in, be it a house, apartment, or condo. On the other hand, content is claimed for the loss or theft of your possessions. Similarly, personal liability covers legal, medical, and repair costs for any unintentional harm or damage caused to others.
These categories are essential, and you should have adequate knowledge of them because these construct the foundation of your insurance policy.
So, carefully read the insurance policy and ask as many questions as you can. Try to understand the terms and conditions and exclusions as well.
Know the concept of over insurance:
It would help if you kept in mind that the cost of replacing your home is not equal to the price you paid for it. Sometimes, it is not even comparable to its market price. This fact will help you to understand the rate of your monthly premium.
Some of the things that you should know about insurance money are:
Actual Cash Value (ACV):
ACV is the amount of money needed to fix your home, minus the decrease in value of your property because of age or use. This is also called Depreciated Cash Value. ACV is applicable for the factors like land, location, and housing demand. In short, it is equivalent to all things which have no direct relation to the reconstruction of the asset.
RV is the amount of money you will need to rebuild your home after destruction without depreciation. RV is also known as the blanket amount. RV will consider everything, including the price and availability of skilled labor to construction materials and building permits.
When you buy yourself home insurance, we suggest you go for the replacement value, not the cash value. The primary reason behind taking this decision lies in the fact that ACV includes the land as well. The land is your tangible asset that can not be replaced and, in most cases, remains intact after a catastrophe.
Keep the weather in check:
Weather and property valuation are interlinked. With time, homeowners have realized that climate change has a significant impact on the market conditions. Severe weather conditions and natural disasters have a substantial effect on the cost of property repairs.
Wildfires, high-speed windstorms, and hail storms have all contributed significantly to altering the property value.
Most insurance policies do not cover you up for natural disasters, even if you are living in an area with extreme weather conditions. In such cases, even if you have an insurance policy for your house, you will still end up spending hundreds and thousands of rupees for the restoration of your home.
So, before getting a home insurance policy, look out for climate-related gaps in your coverage and add endorsements or separate storm policies such as flood, earthquake, and hurricane insurance, etc.
Also, make sure you get flood insurance as well. We do not realize this, but even a tiny leak can soil your furniture, flooring, interior, carpets and spur mold growth in your walls and insulation.
Take into account all the assets:
Before finalizing your insurance policy, make sure you know about the inclusion of your assets. Some of the guidelines do not cover assets when they pass a specific value bracket. For example, an insurance policy might not insure your help if they exceed Rs.10 million. In such cases, you only receive a certain amount of the total value.
The best tip is to document the contents of your home room by room and also include detailed descriptions of each item, including its dates purchased, model and serial numbers, photos, videos, receipts and appraisal. Also, make sure that you store your records safely and securely, such as in the cloud or on a USB drive.
Consult your broker:
Home is the most valuable asset that requires a lot of attention and care. Small incidents such as minor repairs, small break-ins, or a broken door can cause you severe financial and emotional strain. In such cases, insurance will help you a lot because it will keep you and your family safe and secure. However, some insurance policies come with loopholes as well.
If you are new to home insurance and insurance policies in general, we suggest you take the help of brokers. They are licensed professionals who know the ins and outs of insurance. They know strictly what to look for and what to avoid in a home insurance policy.
So, these are some of the things you need to know about home insurance. Give this piece a read and try to learn as much as you can about home insurance and how it works in Pakistan.
If you have any other questions, leave us a comment in the comment section below, and we will get back to you as soon as possible.