Why home and contents insurance is important in property investment

Photo By: Tierra Mallorca on Unsplash

Home and contents insurance is a necessary expense whose importance cannot be expressed enough. Outside the risk of natural disasters, it also covers theft and other incidents that are very easy to overlook.

Imagine running the tub and you suddenly remember that you forgot to send an important email. You dash off to your laptop and while you are there, a Facebook notification pops up telling you that a friend just got married. You would have been invited of course, but it’s the lockdown, so you understand, and you turn to her page to start looking at the wedding photos. Before you know it, you’ve also checked out what other high school and college friends have been up to and two hours or so into it, the tub has run over and your bathroom, bedroom and hallway are now drenched. Water can cause a lot of damage to your furniture, floors, walls etc. What do you do?

Sometimes it’s as easy as taking what was damaged and refurbishing, or looking out for online sales like the weekly Spotlight homemaker sale to replace cheaply, or repainting DYI, but, money talks. If you were not prepared for such an eventuality, how will you repair the damage?

This is an incident you wouldn’t ordinarily think of when you consider buying insurance. It’s easier to think that break-ins could happen while you are away on holiday, or if you are at home, the only thing that can catch you off guard is a natural disaster. 

Let’s look at the details home and contents insurance entail.

Home Insurance

Also known as building insurance, home insurance covers the actual structure - the building itself as well as fixtures and fittings in the home like cupboards, wardrobes, plumbing, and other immovable items. Depending on your insurer, home insurance will also cover any legal liability that may occur should someone get injured in your home. It is very important to know that home insurance is not calculated on the market value of your home but the rebuild value. Knowing this will prevent undervaluing your home which will, in turn, affect your insurance claim should you need to lay a claim if damage happens. Furthermore, understand that damage caused by general wear and tear is not covered by building insurance.

There are variations to home insurance and we will discuss them further below.

1. Landlords Insurance
   If you own any property that you are renting out, you can get cover tailored specifically to your needs. Much like home insurance, landlord insurance covers the building itself and if you so choose, it can also cover the fixed items in the home. This insurance can also cover you if your tenants default in rentals, or in the event of liability, or loss of income if the home cannot be lived in.
   
   
2. Renters Insurance
   This offering covers your personal belongings in the space that you are renting. The landlord will cover their bit with the building and landlord’s insurance. You may then choose to pay your own way in insuring what belongs to you. If there is a break-in, for example, and they take electronics like your television, cellphones, or even jewelry, the landlord’s insurance will not cover your items - that bill is entirely yours. Renters insurance will then come in handy here.

Contents Insurance

As mentioned briefly before, contents insurance covers the movable items in your home. This is especially helpful in replacing those items after an unfortunate incident like theft, or a fire, has taken place because the money to replace them all at the same time may not be available. Contents insurance can work for a landlord for fixed items and renters as renters insurance. Either way, the contents are covered against any risk.

A lot of insurance companies usually offer building and contents insurance under one broad cover. This makes for easier management and may also be more financially sensible. It may also lead to a lower premium and will be less expensive than taking out two different policies and sometimes, with two separate companies.

Photo By: Andrew Neel on Unsplash

Benefits of building and contents insurance include, but are not limited to:

1. It protects you in the event of damage to your property by nature (floods, fire, hail, etc) and theft.
2. Makes it easier to replace items as finances may not be available otherwise, following an unfortunate incident.
3. You are covered for liability in case anyone is injured in your home
4. Having insurance makes for less stressful problem-solving if an unfortunate incident has occurred
5. If you use one insurance company, it makes it easier and more manageable

Points to consider when deciding on building and contents insurance:

1. Work out what you can afford.
   Do not go for cover that will eventually strain you in the name of having building and contents insurance, whether together or separately.
   
   
2. Check the exclusions and excesses.
   Things like the materials the roof and house are made of have an impact on your premium. Be sure to arm yourself with this information in choosing which package will work best for you as this will certainly have an impact on it.
   
   
3. Do an inventory check, room by room.
   This is necessary for contents insurance to determine what is in the different rooms and what value those items have. This inventory check is also vital for personal belongings in the case of renters insurance.
   
   
4. Specify your high-value items.

Photo By: Vaibhav Nagare on Unsplash

We hope this information is useful and will open your mind to the different types of cover available, and push you towards obtaining what is suitable for your pocket.