Home Insurance Explained
Home Insurance Explained
- By: Frank Makrides
- Updated on December 2, 2020
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For most people, home insurance is explained as the necessary payment that provides peace of mind and something that you hope you never need to actually use.
What is home insurance?
Home insurance is a type of insurance that protects your property as well any personal belongings that reside within this particular property from things like damage and theft.
The concept of home insurance is pretty simple, right?
Well, there are a few different types of home insurance policies you can opt for depending on what your needs are;
Building insurance, content insurance, and building insurance & content insurance as one larger package.
If you’re unsure which of these you need, then you’re in the right place.
Whether you’re using a high professional service like Gabi Insurance (which we’ll talk more about later on in this post), or one of the many other home insurance comparison sites out there, it can still be quite difficult to understand which package and insurer is best for you.
But after you read this article, home insurance explained, you’ll be equipped with the knowledge to decide on exactly these things.
So we encourage you to keep on reading if you want to take the stress out of choosing an insurance policy plan.
How does life insurance work?
Life insurance is an agreement between the life insurance organizations or company and the policyholder. The life insurance policy pays the amount of designated cash to the policyholder’s beneficiaries upon his or her passing.
There is typically a detailed questionnaire that requests your age, your family health history, if you drink, smoke and other detailed questions to determine your risk from a policyholder standpoint.
The next step most life insurers will request a history of your specific health and usually an examination as part of your application process.
You should read the fine print carefully, take notes and ask questions anywhere you need further explanation.
Remember to ensure that you are purchasing from a trustworthy and reputable insurance organization. Shop around for similar coverage and look at the overall costs of coverage in your analysis.
A financial advisor or insurance agent acting as your fiduciary or someone who is looking for your financial interests is also someone you could consult in the life insurance selection process.
What are the different types of home insurance and coverage?
It’s important to know exactly what you’re paying for so that you’re not wasting your hard-earned money and if anything, unfortunately, does happen to your home, you know what you can do about it (and how your insurer can help).
Building Insurance
Building insurances cover any costs on your property in terms of repairing damage to the structure of the property, this can include things outside and inside:
• Walls
• Windows
• Roofs
• Ceilings
• Sinks
• Baths
• Toilets
To name a few common ones.
A general rule is that your building insurance covers the cost of your building from the ground up; with that being said every insurance company’s policy can differ very slightly so it’s important to read more into them specifically before you choose one.
Content Insurance
As we’ve covered, building insurance covers the actual property as well as any necessary items in the house that are essential to your quality of life – such as sinks, baths, and toilets.
Content insurance, on the other hand, is more to do with your personal belongings and the insurance covers any damages to these items, as well as theft.
As a rule of thumb, your content items are generally thought to be the items you would physically take with you if you were to move to another home.
Though as we’ve stated previously, this is a general rule, and you should look into the specific policy of whichever insurance company you choose to go with.
What doesn't home insurance cover?
Every type of insurance policy has exclusions, so it should be no surprise that home insurance policies are no different in this case either.
Though some of these can be covered (with an added fee) to your insurance policy, there are some common exclusions across the board you won’t be able to get cover, however.
They are usually things like:
• Any damage deliberately caused by members of the household.
• Weather damage such as Frost damage.
• Damage done to the exterior items by storms, such as gates and fences.
• Damaged caused by wildlife like birds, bears and other wild animals.
• Damage caused by pets.
Again, these are general things we see from all sorts of insurers, so you’ll have to look into the one you’re going to go with specifically so you know how and if you’re covered in certain scenarios.
What are home insurance deductibles?
Insurance deductibles are common in all types of insurance policies, whether it’s within health care or the property sector – they’re essentially out-of-pocket costs one must pay before the actual insurance coverages actually kick in.
There are two main reasons as to why deductibles are apart of most insurance policies, and here they are:
Moral hazard
Bottom line, a moral hazard is a risk that the policyholder may not act in good faith; this particular insurance policy helps to protect the policyholder from any losses as the insured party (you) may act irresponsibly knowing that you may engage in any behavior without suffering the financial consequences associated.
A deductible, in theory, negates this outcome as the policyholder is responsible for the portion of the costs; so the deductible itself helps to align both the interests of the insurer and the insured so that both parties work together’ to mitigate the risks associated with a potential financial loss.
Financial stability
Another good reason as to why deductibles are a part of your home insurance policy is to help the insurer maintain financial stability, as it helps to provide a cushion regardless of the size of the claim; whether minimal or catastrophic.
If an issuance policy didn’t have this cushion, regardless of it being a minor claim or a large one, it would be completely up to the insurer to sort out.
This would result in an overwhelming amount of claims, and further increase the cost of the policy for the policyholder.
Due to the overwhelming amount of claims, it would also mean that the insurer couldn’t properly respond to actual meaningful losses.
Why is Gabi Insurance our #1 Rated For Home, Renters Auto Insurance & More
If you’ve been reading from the beginning, there seems to be a lot that goes into finding the best home insurance for you and your needs, as well as your budget.
There are a lot of things to consider such as, what sort of coverage you need, the price of such insurance, including the deductibles, and if you’re going to need extra coverage based on what items you have in your possession.
Because of this, it can be hard to manually compare home insurance policies to find the best one for you, without having a total meltdown whilst doing so.
This is why many people use services like Gabi Insurance, which offers you a way to compare home insurance policies from all types of insurers – without the stress.
So that you can rest easy knowing you have the insurance policy fit for you.
#1 Rated For Home, Renters Auto Insurance & More
Insurance companies do not reward you for your loyalty, so always price around to see if there are better deals to be had out in the open market. There is no better company out there for auto, home, renters, landlord and umbrella policy insurance comparison shopping than Gabi. Within a couple of minutes, you’ll be able to find the policy that is the best fit. Try Gabi and save!
Summary
As covered, there is a lot that goes into choosing the right home insurance policy and finding the right insurer that aligns with your needs.
But hopefully, by now you’re equipped with the knowledge as to what you should be looking out for when using any sort of compare site, like the one mentioned above.
Before you leave, we want to give you some key takeaways, some things you should keep in the front of your mind whilst picking out a home insurance plan:
- Remember to shop around – don’t be lazy about picking an insurer just so you can get back to doing something much more enjoyable – it will be well worth your time to shop around if a disaster were to strike in the future.
- Make sure you get the right level of cover – when it comes to protecting the contents of your home make sure you correctly calculate your items so that you’re accurately covered on any damages or loss.
- ALWAYS read the terms of the policy – regardless of the information we have laid out for you in this article, every insurer and policy combined can be completely different from one another, so make sure you know what you’re spending your money on!
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Frank Makrides
Is a former financial technology industry executive, licensed realtor, real estate investor, an award-winning speaker, has been published, holds multiple patents and is passionate about all things personal finance and entrepreneurship. He is also a proud husband and father of 2 amazing children.
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