Guide to Buying Home Insurance
What would happen to your family if you lose your home and everything in it to a fire?
Everyone dreams of having their own home someday. For many Filipinos this is one of their most important goals. We work long and hard – some even leave their families for foreign jobs – so that this lifetime dream can become a reality. We invest blood, sweat and tears to build this haven for our family.
If you own a home, it is absolutely necessary that you have it insured. You simply cannot take a chance with what is probably the single biggest investment you will ever make. Natural or man-made disasters can strike and destroy your home any time and there’s nothing you can do to stop it. Although you may not be able to avoid disasters you can prepare for it so that your world won’t come crumbling down in case an unfortunate catastrophe hits your most cherished possession. Think about it for a minute, what would happen to your family if you lose your home and everything in it to a fire?
Benefits of home insurance
The time and money you spent on building your home can be lost within seconds or minutes in the midst of a disaster. The greatest benefit of having your home insured is getting protection against financial losses in case your property is damaged by fire, natural or man-made calamity, and other perils. Home insurance ensures you get back your investment so you can rebuild. If your home is not protected it will be extremely difficult, perhaps, impossible for you to build your dream home again. Home insurance gives you the security and peace of mind that every hardworking Filipino deserves. It will let you sleep more soundly at night knowing that you won’t have to bear the financial burden should anything happen to your precious home. Home insurance will free you from the physical, mental and emotional stress that comes with losing a treasured possession.
Basic coverage
Properties that can be covered by home insurance (also referred to as fire or property insurance) include structures used as dwelling units, row houses, townhouses and condominiums. Renters or tenants may also get home insurance for protection of their possessions.
The basic or standard home insurance pays actual loss or damage caused by fire and lightning. The basic policy covers the house and/or your belongings like furniture, appliances, equipment, fixtures and fittings, and personal effects (excluding money and jewelry). The policy will pay you the cost of repairing or rebuilding the house based on present costs. The contents of the house are covered on actual cash basis, which means the replacement cost less depreciation.
Extended coverage
Home insurance packages come in different varieties. Besides the standard coverage against fire and lightning, home insurance policies may also cover damages due to earthquakes, typhoons, flood, eruptions, tidal waves, landslides, smoke damage, explosions, vehicular impact, and falling aircraft. Coverage can also be extended to loss and damage arising from bursting or overflowing water tanks and pipes, water and fire fighting damage, burglary and theft, riots, strikes or malicious acts of any person.
Some policies include benefits like personal liability insurance which pays for legal expenses in defending any lawsuit filed by a third party who is injured or sustained property damage while in your home. There are also packages with built-in personal accident insurance and hospitalization coverage. Other possible extras to home insurance include relocation allowance (if you need temporary shelter), clean-up/debris removal expense, rental income protection (for rental properties), home repair assistance (plumbing, electrical and appliance repair), and household employee insurance.
Cost of home insurance
Many people are not aware that home insurance is not as expensive as other types of insurance. You can get one year basic protection for a P1 million property for less than P2,000. That’s a small amount to pay in exchange for your peace of mind. The cost of home insurance varies depending on the value of the house (lot not included) and the extent of coverage. The wider and more extensive the coverage, the more expensive it will be. So include only the coverage that you really need. Exclude hazards the property is not exposed to like protection against flooding when your house is on very high ground. Other factors that will affect the amount you pay are the materials your house is made of, location of the property, surrounding structures, and exposure to various hazards.
Buying your home insurance
You can buy your home insurance policy from non-life insurance companies. Be sure that you are dealing only with legitimate insurers authorized by the Insurance Commission (www.insurance.gov.ph). Get a quotation from at least three insurance companies. Give them identical information about your property so you can compare accurately and choose wisely what’s most suitable to you. Bargain hard for a lower price if you are on a tight budget. While cost is a big factor in choosing, it should not be the sole basis. You need to insure your property with a company that you can trust. Buying your insurance from a fly-by-night company is as bad as not insuring your home.
Alvin Tabañag is a Registered Financial Planner of RFP Philippines. He is personal money management coach and founder of Pinoy Smart Savers Learning Center. He is the Best-Selling book author of “12 Steps to Build Wealth on Any Income”.
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