Imagine you are on vacation, and you come back to find your home broken into. Some expensive electronics like your laptop and your music system are stolen. Your jewelry and other personal belongings have been robbed as well. Having invested your life savings to purchase such items only to find them missing would certainly be a nightmare. The next logical step would be to file a complaint at the nearest police station, but that does not guarantee that the valuables will be recovered.
To receive financial protection against such mishaps, you recommend that you invest in a contents insurance policy. Availing of such a plan provides the much-needed financial coverage if the valuables in your home are stolen or damaged due to events like a fire or flood.
About home content insurance
This is coverage provided for the things you keep in your home, such as furniture, electrical goods, as well as personal belongings. It offers protection against loss or damage to valuable items in your house. Different insurance companies offer different levels of cover. However, the basic policy covers damages against fire, earthquake, water leakage, storm, explosion, lightning, or flood. Insurance providers also offer protection to your home valuables in case of burglary and theft.
Generally, homeowners purchase this type of coverage along with their home insurance. This offers dual benefits and provides comprehensive coverage. However, those who stay in rental apartments may buy a stand-alone plan. This is because such individuals do not own the house. They have ownership only on the items that belong to them and hence may insure only the contents of the house.
Types of content insurance
The two main types of contents policy are the ‘new for old’ and ‘replacement value’ plans. A replacement value insurance policy, also known as an indemnity policy, offers coverage for the value of the household items. It is important to know that the value of some items like the refrigerator or laptop depreciates. For example, you may make a claim on a three-year-old laptop based on its current value and not at the purchase price. Depreciation is generally calculated every year. To ensure that you are covered for the latest value of the item, it becomes necessary to review your insurance policy regularly.
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‘New for old’ insurance policy or ‘as new’ policy, on the other hand, indicates coverage for the total cost of the items. This means you are offered the total cost of replacing the damaged or lost goods with new possessions. Since coverage for this type of insurance policy is higher, a greater premium is charged. You may make a choice based on your needs and the type and value of your possessions.
Tips for obtaining the best insurance policy
To obtain the best deal, it is advisable to compare numerous insurance providers. Opt for an insurer who is well-reputed in the market. Understanding the pros and cons of major insurance companies will help you obtain the best coverage at an affordable price. Request multiple quotes and conduct a cost-benefit analysis. To reduce unnecessary costs, you may consider making your premium payments every year. Some insurance companies often levy a monthly debit fee. The cumulative cost may result in a huge amount.
In an event where you have not made any claim during the year, you may request your provider to offer you a No Claims Bonus (NCB). If you have not claimed for a long time, the insurance company perceives you as a low-risk individual and offers a greater discount. You may also combine your house insurance along with content coverage in a single plan. Doing so from the same insurance provider will help you land a better deal.
The importance of contents insurance
Though such an insurance plan is not compulsory, it is advisable to purchase a policy to get financial protection in an unfortunate event. In case you wish to avail of comprehensive coverage, you may do so at an additional premium. Some of the common extensions include the home emergency cover and additional damage cover. You do not wish for any untoward event to take place. However, in case any unfortunate event occurs, you may lose your expensive valuables. Replacing such valuables with new purchases may burn a hole in your pocket. Therefore, avail of a contents insurance policy and ensure that all your possessions at home are protected.