For most people, the family home is the most expensive asset they will own in their lifetime. It usually takes decades of mortgage repayments and hard work to pay off the family home. Unfortunately there is also a risk that your home will be damaged or destroyed by accident, fire or natural disaster. That’s why most people insure their property. But what if your level of insurance was inadequate and you couldn’t afford to rebuild? That is called under-insurance. Here are some simple tips to make sure your policy will cover the cost of rebuilding or repairing your home, if it is damaged.
Update Your Policy When you Renovate
Many people spend thousands of dollars updating their property, including expensive new bathrooms, kitchens, decks and pools. However, many of them forget to increase the value of their insurance policy. What happens if there is an earthquake and the pool you just spent $25’000 on develops a massive crack? It is very important to remember to include any changes in the value of your property in the insurance policy.
Get an Evaluation
One way to ensure your property is fully insured, is to hire a property evaluator to examine it. A property evaluator is knowledgeable about construction techniques, materials and the costs of rebuilding. You might have built your property 25 years ago when materials were cheaper and the quality of the construction may be to a higher standard. A property evaluator understands the cost of materials in today’s money and can price in any higher quality construction used within your home.
Think About Additional Costs
Many people think about the costs of rebuilding without considering the additional costs involved. If your house burns down, there may be additional costs to remove the wreck of the house. There may be damage to the utilities going into the house, which require more money. An earthquake could destroy long water pipes, gas lines and sewerage which run on your property. If the house contains asbestos, there may be expense associated with removing it. There may be substantial groundworks required before rebuilding.
If your house was built with poor quality foundations that conformed to the building requirements 50 years ago, that may no longer be the case. If that house is destroyed, the new house may have to comply to an array of new building requirements. If your house is built using materials that are now expensive, ensure the policy will cover buying those materials again.
Think About Site Problems
Some properties have tricky issues involved with building on the site. These issues can increase the cost of rebuilding a home. Is your land severely sloped? Are there issues with sinkholes in the area? Is the site geologically stable for a modern house to be built upon?
Are There Additional Structures?
Think about the expense of attached structures. If you have recently built a very expensive garage, garden shed or workshop, make sure it is covered in your insurance policy. If you have an expensive stone wall, make sure your insurance policy also covers that. An earthquake could destroy everything on your property, not just your house.
Understand Exactly What is Covered
It is crucial to understand that only certain risks will be covered by an insurance policy. Not all policies cover flood damage in the same way, with water run off being treated differently than flooding from a river. Many people have been caught out by insurance companies in the past for that. Read the fine print and understand what natural disasters and criminal acts your property is covered against.
One way to ensure you are sufficiently insured, is to get a qualified builder to estimate the costs of rebuilding your home. He will have access to the actual prices of the materials used and will understand the quality required.
If you are unsure about what is covered in your policy, ask questions! The insurance company must be upfront about your policy and inform you about what is covered. If you are talking to them on the phone about a specific point, ask for a reference to the terms and conditions which demonstrate it is covered.