Understanding Your Home Insurance Policy

Deciphering all the parts of your home insurance policy can be difficult. This article covers the basics for you to better understand your policy. All home insurance policies follow the same general format: A conditions page, a definitions section, exclusions to the policy, and sections detailing the cover for property insurance and liability.

Policy Schedule

The policy schedule is the part of your insurance policy that provides an overview of the details specific to your contract, including the following:

• Name of the insurance company
• Your name and address
• The period of insurance
• Level of cover- Information such as the standard cover provided and any additional cover that you may have selected (e.g., Contents, Home Emergency, Legal Cover), along with your excess and the limits for each line of cover
• Premiums – this is how much you have paid annually, or will pay each month for cover
• Any special conditions or changes made to the policy

When you receive a copy of your policy, it is important to review all the information on the policy schedule for accuracy. Retain a copy of your policy schedule in case you have questions concerning your policy. If you change or revise your policy at any time, a new policy schedule will be issued to you reflecting those changes. Make sure to review and keep this new policy schedule page as well.

Definitions

A home insurance policy always includes a definitions page that defines the vocabulary in your policy to make it easier for you to understand.                 

A standard home insurance policy insures your home against unforeseen damage. If it is a combined policy, it will provide cover for both damage to your buildings and contents.

Property Cover

Buildings: This offers protection as a result of damage to your home such as fire. It does not cover the normal wear of your home or maintenance-related problems. You need enough cover for the cost of rebuilding your home. Determining cover can be somewhat complex but, speaking with a broker when taking out your policy may help with this.

Contents Cover

Contents: This covers the contents in your home such as furniture and clothing. It also normally extends cover for your personal possessions that are worn or carried outside of your home. Calculating the value of your belongings can be difficult but these three easy steps will help you:

1. Create extensive records of your possessions – Experts recommend that you take close-up and wide-angle pictures of individual belongings. Then make an item-by-item list so that you can quickly skim to see what items are documented. Some people find it easier to keep their lists of belongings grouped according to the rooms where they are located, while others group their belongings by item type such as jewellery, artwork, books and furniture. However, if you decide to record your possessions, it is a good idea to store the information in at least two different places. It is very important to retain receipts as proof of purchase wherever possible.
2. Learn the difference between policies that arrange cover on an indemnity basis or a new for old basis – On an indemnity basis, once an item is lost, you will receive the amount that your item is currently worth. For example: If you purchased a chair five years ago for £500, now it may only be worth £100. An indemnity policy will cover you for the £100. If your policy provides new for old cover, you will receive the amount it costs to replace the item with another one of comparable value. So, in this instance, while that £500 chair is now worth £100, it would cost £900 to replace it with a comparable one. New for old policies cover you for the £900.
3. Do your research. Even though your kitchen table may have cost you £500 when you first bought it, a comparable new one could cost double that amount: this is the amount of cover you want. Search online and visit local furniture stores to research comparable prices.

Alternative Accommodation

If a covered loss forces you from your home, alternative accommodation provides a safety net for providing housing for yourself, family members normally residing at your house, and domestic pets when you are unable to live in your home—up to the sum insured.

Liability Cover

This portion of your policy covers against legal action for bodily injury or property damage that you or your family members may cause to other people. It pays for both the cost of litigation and any court awards—up to your sum insured. It covers you whether you are at home or away.

If a visitor is injured in your home, you will not need to incur any expenses except for those associated with emergency first-aid (if applicable). All additional costs of the injury will be paid to the injured person up to the sum insured without a liability claim being filed against you.

Additional Considerations

Make sure to set aside some time each year to review your policy and ensure that the sums insured, and levels of cover are adequate. Evaluate your needs based on the rebuilding cost of your property, the money you have in savings and the amount of risk you feel comfortable taking. Then, make sure to read the entire insurance policy -especially the conditions and exclusions—to guarantee that you are covered in every situation that is necessary for your lifestyle.