How to insure your home

When you take out insurance, you are covering yourself against the unexpected. You want to be protected against theft, fire, hurricane force winds that wreck your roof, or rain that destroys the contents of your home. If you don’t have insurance that provides adequate protection, you could face tremendous loss if disaster strikes.

Household insurance policies can vary considerably in what they offer. Take as much care over choosing one as you would in buying the house itself. If your house burns down or is destroyed in a hurricane, will you get enough cash to repair or rebuild it? Will you be able to replace all your stolen property? If you have an old policy, does it allow for new purchases and price increases since you first arranged it?

When choosing household insurance, you should first:

• Decide exactly what you want insured. This can include your buildings, your contents or specific valuables (like jewellery, cameras, or silver).
• Find out exactly what the policies cover, compare the terms and charges (called premiums), and choose the one that suits you best. If a policy doesn’t provide the coverage you want, ask the insurer what changes are possible.
• Look out for any exclusions (what a policy doesn’t cover) and check whether you will have to pay the first part of any claim, called an excess.

Fill in your application very carefully and truthfully. You are responsible for the accuracy of your answers and your policy may be invalid if you give false information.

Insuring your home

Most policies require that buildings should be insured for their full rebuilding cost, not the price you would normally expect to sell them for. Don’t under-insure. Insuring for less than the cost of rebuilding your home could result in a claim not being met in full, even when it is a claim for partial damage and less than the sum insured.

It is up to you to work out the cost of rebuilding your home. For a quick estimate of the amount multiply the area building costs per square foot by the total square footage of your house. To find out the area building cost in your area, you may consult a member of the Institute of Bahamian Architects or a contractor.

Check the insured value of your home each year against any possible increase in the area construction cost. Some policies may offer Automatic Inflation Clauses that increase the insured value(s) each year to reflect any increase in the cost of construction.

Do not insure your home for the market value. The cost of rebuilding your home may be higher (or lower) than the price you paid for it or the price you are able to sell it for.

You must tell your insurer immediately about any changes in your circumstances that would affect your insurance, for example, if you add an apartment to the house and do not tell your insurer your policy may be invalidated. It is best to keep a written record of all your contacts with the insurer.

Tell the insurer or broker about any major changes to your home like an extension, or central air conditioning as soon as you start the work.

If you live in an apartment, the owner normally arranges the insurance on the building. Check what your lease says and that there is adequate cover.

Insuring your belongings

You’ll want to insure your household contents generally, clothes and other belongings. Tell the insurer about items such as jewellery, furs, silver or a valuable painting, which might need separate or extra cover.

Make a list to help you value your belongings and keep it up to date. Take photographs to help police to recover the items if they are stolen. It will also make claiming on the insurance easier. If you have any particularly valuable items get them professionally valued, and obtain a certificate giving a full description.

Decide what kind of insurance cover you need. There are two ways to insure your belongings:

• Replacement Value Insurance pays the dollar amount needed to replace damaged personal property with items of like kind or quality without deduction for depreciation.
• Actual Cash Value Insurance provides an amount equal to the replacement value of damaged property less any depreciation. Unless a policy specifies that the property is covered for its replacement value, the coverage is for actual cash value.

Don’t forget the importance of insuring yourself for liabilities toward other people. Almost all household and contents policies provide cover of this sort for example against your responsibility for injuries to visitors and damage to their property, or accidents caused by your family.