Home Insurance - Types

Different Types of Home Insurance

 

 

Insurance is all about risk. Your insurance company will take on a risk of a certain accident or expense occurring and if it does, they will pick up the bill. In exchange for this, you pay them a premium which they calculate based on the chances of the event occurring, and what they estimate the cost of this expense to be.

 

So when speaking of different types of insurance, you are really speaking of what risks you want to pass on to the insurance company and how much you are willing to pay for it, based on their quote.

 

Most home insurance policies take on two main risks, risks to the building, and risks to the contents of the home. Risks to the building are typically posed by fires, floods, dry rot, wet rot, leaking roofs and similar expenses. These are events that most of us could not cope with in our day to day balancing of income and expenditure. Most people can handle small events like a leaky tap or a broken window, but who is realistically in a position to pay for a new home if their home burns down in a fire? Or who can pay for a new roof if it turns out that the tiles are all falling down and the roof needs to be replaced? To give ourselves some peace of mind we pay insurance companies an agreed amount every month or year and if it does happen, they’ll pay the cost. The insurance company is happy to agree to this because they know that every year, very few houses burn down and for the most part, they will be able to keep the premiums and do what they like with them.

 

The other risk that people are generally happy to insure against is for the contents of their home. Again, a fire will destroy everything in your home, but burglary and accidental damage can also occur and if they do, the insurance company will replace the contents that are lost.

 

The price of the insurance will depend on the likelihood of damage occurring. So for example, if you live in a high crime neighbourhood, your home contents insurance will cost more. Also, if you live above a chip shop, the risk of fire will be higher and accordingly the premium will be higher. There are some cases, where the risk is so high that an insurance company will turn down your request for insurance. If your home is in a flood plain, you may find that it is impossible to insure against floods and in such situations you should find out about government provided insurance schemes.

 

You will never be able to insure yourself against every possible occurrence and you will simply have to hope these events do not occur. For example, insurance policies will specifically state that you are not covered in an act of war or civil unrest. You have to read the insurance policy carefully and find out exactly what you are covered against. The other important thing to remember is that you must be honest in your application because if the insurance company discovers that you lied in an important matter, they will be able to avoid paying out.

 

 

This article is from Best Insurance Companies UK web site.