Personal Property Insurance

In most countries you are required to take out property insurance before you can get a mortgage. So if you already own a home, then you already have property insurance.

Whilst there are lots of different types of property insurance which cover you against a variety of damages, there are 11 common types of damages most property insurance will cover you for.

These are called “perils” by the insurance industry, and are things which could damage your home.

11 Common Perils Covered By Property Insurance

• Fire or lighting damage

• Smoke damage

• Broken glass

• Damage from aircraft

• Damage from rioting

• Damage from vehicles

• Vandalism to your home

• Property loss

• Theft

• Damage caused by an explosion

• Damage by windstorms, hailstorms or hurricanes

All of these should be covered under a basic homeowners insurance policy, although it is possible to upgrade this policy to cover more things such as :

• Damage caused by electrical surges

• A collapsed roof due to snow

• Damage from burst water pipes

• Damage from trees falling on your house

• Damage from faulty water heaters

For most people, basic homeowners insurance should be enough to cover the majority of accidents and damages in the home.

But if you live in an area where there is a particular risk of a certain type of damage (e.g. roof collapsing due to snow), then it may be a good idea to take out extended coverage to protect yourself from such things.

Personal Property Coverage

It is also worth bearing in mind that a home owner’s insurance policy should also cover damage to your personal possessions, as well as damage to the property itself.

This personal property coverage will usually account for about 50% of the coverage on your home, although it may vary depending on what policy you signed up for.

To ensure that your personal property is covered, make sure you understand the provisions of your policy for the things that are included and the things that aren’t. Then document everything you have in your home, using either a video recorder or a camera.

Everything you document must be fully described and include the serial number, the date of purchase and the receipt (if you still have one).

Whilst documenting every item in your home might seem like a strange thing to do, it will ensure that you are fully covered should any of your personal possessions be stolen or your home is destroyed in a fire.

The information you document should then be stored in a safe place, such as a safety deposit box or stored online.

This is important, because if you kept all your documentation as paper files on a shelf and your house burnt down, you would have nothing to show the insurance company and so would not receive compensation for your lost items. So keep this information in a very safe place!

Rental Property Insurance

Renters insurance applies if you are renting a house or flat, and have a lot of items within your home that you would like to protect in the event that they are stolen or accidentally damaged.

If however you have a lot of second hand furniture, and don’t have many expensive items, then you could probably do without renters insurance as it wouldn’t really be of any benefit to you.

Since you are not responsible for damage to the building, you don’t have to worry about getting property insurance.

Although if you do damage the property, be aware that the cost of that damage will most likely be taken out of your deposit.

Natural Disasters & Home Insurance

Whilst basic homeowners insurance will cover you for certain types of natural disasters, such as hurricanes, it won’t cover you against floods or earthquakes.

This is something which has caused Hurricane Katrina victims many problems, as whilst they were covered for hurricane damage, the insurance companies are reluctant to pay out because they argue that the damage to their homes was due to flooding.

Generally you won’t be able to get flood or earthquake cover unless you live in an area that is at risk of flooding or earthquakes (e.g. on a flood plain or a fault line), and due to the cost involved of repairing or replacing property damaged by a flood or earthquake, you can expect to pay very high insurance rates for it.

The only way to avoid this cost is to move to an area which is not at risk of flooding or earthquakes, otherwise you definitely need to take out this type of insurance despite the high costs involved.

As without it, you could end up loosing your home and you will not be compensated for it (just like the Hurricane Katrina victims, many of whom are now homeless).