Insurance Basics Every Property Owner Should Actually Understand

When it comes to home insurance, it’s a form of financial protection for property owners and is designed to help with covering the costs of repairing or, in some cases, rebuilding a home or replacing belongings after unexpected situations like theft, fire, or storm.

Knowing everything from the key components, limitations, and terminology is essential to avoid being underinsured and falling victim to the costs of not being insured enough. Here are some of the home insurance basics every property owner should understand.

Understanding the two core types of coverages

There are two types of coverage when it comes to home insurance. These include:

Buildings insurance

Covers the physical structure of your home, including the walls, roof, floors, and permanent fixtures like fitted kitchens or bathrooms.

Contents insurance

Protects your personal possessions inside the home, from furniture to electronics to clothing, against theft and damage.

You can also take advantage of a combined policy, which is often cheaper to purchase both buildings and contents insurance together under one policy.

What is covered?

Coverage is important to know when it comes to home insurance, and standard policies will usually protect against the following:

Fire and smoke damage
Theft and vandalism
Storm and flood damage
Escape of water - burst pipes and frozen pipes
Subsidence

Key limitations and exclusions

There are some key limitations and exclusions that are worth knowing because standard insurance doesn’t cover everything.

Common exclusions will include the following:

General wear and tear

Damage from age, a lack of maintenance, and general deterioration isn’t covered. So, for example, if you have a leaking roof due to old tiles, it’s not covered.

Floods/earthquakes

Floods and earthquakes often require separate and specialized coverage, especially when it comes to high-risk areas.

Unoccupied property

If you’re leaving your home empty for long periods of time, usually over 30-60 days, then your cover may be invalidated.

Deliberate damage

You’ve also got damage that’s caused deliberately, which, if done by yourself or your guests, isn’t covered by standard home insurance.

Valuation: replacement costs vs actual cash value

When it comes to home insurance, there’s the replacement cost that’s recommended, as it pays to rebuild your home or replace items at today’s prices without having to deduct for appreciation.

You’ve also got the actual cash value, which will pay the value of the item minus the depreciation. That might not be enough to replace it, of course.

Important terms to understand

There are some important terms to understand so that you can be knowledgeable about how home insurance is often worded to you in documents that get sent.

Rebuild cost - The cost to rebuild your home from scratch, different from the market value.
Excess - A deductible that you agree to pay out-of-pocket for each claim. A higher voluntary excess usually lowers your premium.
Personal liability - Covers legal costs if someone is injured on your property or if you accidentally damage someone else’s property.
Alternative accommodation - Covers the cost of staying elsewhere if the home is uninhabitable due to an insured event.

Top tips for property owners

If you’re after some top tips for taking out home insurance and making sure it’s correct, here’s what you need to know.

Update your policy

Tell your insurer about renovations or new high-value items to avoid being under-insured.

Create a home inventory

Document all your possessions with both photos and receipts to simplify the claims process.

With these tips, you’ll be able to get the most out of your home insurance and protect your property and finances.

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