Buying home insurance today is no longer a “want” as it is a “need”. If your home is ever destroyed and you don't have insurance to repair or replace it, you could be in debt for life, or worse. However, just having any old home insurance policy isn't enough.
Not every policy out there will cover you no matter what. In fact, believe it or not, there are home insurance policies that are only designed to protect your insurance company if something goes wrong. So to avoid being faced with financial disaster, here's what you need to look for when buying home insurance.
Most home insurance policies today contain a section that specifies “defined events”. These are known events that could destroy your home. And while generally speaking most disasters are included, there is a hidden intention here your insurance company doesn't want you to know.
And that is – if something happens to your home that isn't defined in this section of your policy – the insurance company gets off scott free without paying you a cent. I repeat. If something happens to your home that isn't explicitly laid out in the “defined events” section of your insurance policy, you get nothing.
That's why you should only buy home insurance policies that are completely comprehensive and cover every known and unknown disaster alike – as opposed to just “defined events”.
Almost every home insurance policy will contain some exclusions. The exclusions will vary from company to company as they are usually based on past claims. If possible, you should always purchase comprehensive home insurance that covers everything without exclusions but if you can't, you need to pay careful attention to this section of the policy.
Most home insurance policies will require you to pay an excess. You should always purchase policies with the lowest excess and read the fine print carefully before signing.
A home insurance policy is a contract of “utmost good faith” between you and them.
What this really means is that your insurance company requires you to tell them everything that could affect your policy. For example, if your family goes on holiday, your home is more likely to be robbed. So if you failed to inform your insurance company, you would not be acting in “utmost good faith”.
Although in principle it may sound sensible, utmost good faith is how most insurance companies scam their way out of paying a claim. This is why you should be very careful and use your common sense to inform your insurance company of everything – no matter how small – that could affect your policy. Cover your butt, because you can bet that they will.
In summary, there is basically only one way to avoid being screwed: buy a home insurance policy that covers everything without exception and be completely honest and upfront about everything. It may cost more and it might be inconvenient, but at the end of the day you'll have piece of mind. And that's what home insurance is all about.
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