Home insurance – things to know (part 1)

by Chris Lang on January 11, 2009

Insurance policyMy last post was about reasons to insure your future home as soon as the contracts are exchanged. Looking for the insurance that is right for you is not an easy task, but breaking it down into a list of things to consider makes it much easier. In this post I am only talking about a building insurance, there is also a content insurance – but it’s a totally different story.

Insurance companies offer policies that cover damage from explosion, fire, flood, earthquake and tsunami, burst pipes, leaks and overflows. Most of these events can seriously ruin your property and literally leave you with no roof over your head, but some of them are less likely to happen in the area where your house is located.

For example, if the house you bought is in the mountains, then tsunami is much less likely to get there then a lightening strike during a thunder storm. On the other hand, of your house is close to the ocean, then you would want your policy to cover tsunamis.

Insurance companies usually have a list of most common claims in your area (by postcode) and you can understand from it what is likely to happen to a house in your particular suburb. For instance, GIO has a postcode profiler tool where you type your postcode and receive a list of 3 most common claim types for the recent two years.

The confusing part of shopping for insurance is that there are many companies and they offer many different packages that are hard to compare. Don’t get discouraged by that because you still can do a decent job of comparing various policies and get real value for your money.

Your rule number one should be: “Don’t pay for things you don’t need”. I mean don’t get a policy that covers absolutely everything, engage your common sense to find the events that are likely to occur and insure for those. For example if you’ve bought an old house then the chance of pipes bursting and something leaking is definitely there, but if your house is on a hill and there are no creeks anywhere near, what are the chances it will be flooded?

And your rule number two should be: “If the policy covers everything but this one important thing – it’s not for me”. A real life example: I was buying a property located in a reasonable proximity to the ocean and wanted it to be insured for tsunami. Most of the policies of different insurance companies had attractive prices but didn’t cover tsunamis. I kept on looking until I found a company that offered what I needed.

People who aren’t friends with Google and find the whole research thing boring, intimidating or otherwise appalling for whatever reason, can resort to paid membership in the Choice.com.au website – there is a section there where various insurance companies and policies are compared, here is the link. They compared 21 companies and the cost of the report at the time this article was posted is $20. I’d say this is not too bad because with these $20 you’ll be buying at least 3 hours of your time, that otherwise would be spent on research in www.

To be continued – subscribe to my feed or via email and you won’t miss the rest.

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