Homeowner's insurance falls into two categories: buildings insurance and contents insurance. Usually you can't buy or mortgage a home without first buying buildings insurance as lenders see this as being the only way that you will be able to protect the assets that the bank shares with you.
Contents insurance is more of an elective
choice that protects you in case of fire or burglary and allows
you to replace personal items that may have been lost.
Buildings insurance protects your home from
every kind of disaster imaginable and as the name suggests insures
such things as fixtures, fittings, baths, toilets, kitchen cupboards
and interior decorations. This type of homeowner's insurance will
cover you for damages caused by explosions, earthquakes, fire, riots,
vandalism, storms, flood damage, objects (such as airplane parts)
falling from heaven, landslides, animal attack, collision with a
vehicle and leakage from pipes, water tanks, septic tanks and heating
Most buildings insurance policies usually
cover other erections on your property such as garages, greenhouses
and garden sheds. However, you will have to check with the insurer
to find out if such things as boundary walls, fences, gates, paths,
drives and swimming pools are covered in your policy.
Most buildings policies also offer cover
for a range of other issues that concern the homeowner such as paying
the cost for a hotel if your home becomes uninhabitable, damage
to underground pipes and cables supplying gas, electricity, oil,
water, or sewage, and damage to n glass in doors, windows and skylights.
There are limits (called excesses) and exclusions
to every homeowners insurance policy. The excess is the amount of
money that you have to pay towards the cost of a claim and exclusions
are potential situations that are NOT covered by the policy. When
it comes to building insurance, homeowners can expect to pay higher
excesses if they live in areas that are at high risk of fire or
flood damage. Exclusions from homeowner's insurance can include
such things as a house that is damaged from war, houses that have
been exposed to radioactivity or houses whose value has been affected
by a violent crime.
The intention of homeowner's
building insurance is to pay for the cost of rebuilding your
house. The insurance company may not consider this to be the same
thing as the market value of your house. Many insurance companies
give rough guides to the level of insurance needed for modern homes
and quite a few offer unlimited coverage. This means your home is
automatically covered for the full cost of rebuilding.
The costs of rebuilding may also be a factor
when it comes to deciding what your cost for homeowner's insurance
might be. Costs of rebuilding vary according to local construction
costs, and the expense and availability of labor and materials in
your area. Costs for homeowner's insurance are also affected by
regional crime rates and geological factors. For instance, if you
built your house right on the edge of the edge of the River Nile
and it floods every year, your homeowners insurance will go way
Whether you are buying building or contents insurance, it really
does pay to shop around and look for the homeowner's insurance that
is best for you. Just by making a few phone calls, savvy shoppers
have been known to cut the cost of their homeowner's insurance premiums
by as much as $400 a year.