Home insurance: how it works
Home insurance is a real universe of concrete guarantees that can be combined in a virtually infinite number of solutions.
The information found on this product is incomplete and sometimes ambiguous precisely because of this complexity. The contract of a home insurance policy easily exceeds 100 pages. Even if not immediately relating to the “home” strictly, a series of circumstances are contemplated.
Home insurance is, in fact, a “multi-risk policy” that affects different areas of coverage. But, in general, this protection protects the home and the people who live there.
Even this policy, therefore, requires adequate customization. It is always better to be wary of “package” solutions that are the same for everyone. It is only with accurate calibration of additional guarantees, ceilings, deductibles, exclusions, and inclusions that we can truly build the right policy for us.
What does home insurance cover?
Home insurance offers different areas of coverage, each of which has subsections, which in turn have specific guarantees:
1 – The Civil Liability to Third Parties of the property insurance
The purpose of this coverage is to protect the inhabitants of the house from the civil consequences(compensation) of any damage that they may be liable for.
The liability insurance policy on the home compensates for the damage caused by their conduct or their property in place of the insured.
For this reason, home liability insurance is divided into two sections, namely home and family.
The Rc Dwelling covers civil liability due to damage caused by the house itself. Floods that ruin the property of third parties, parts of the structure that yield, fires originating in the apartment, and so on.
The Rc Famiglia covers the civil responsibilities of the behaviors of the family unit, whether they occur inside the house or outside.
Although for convenience, this policy is referred to as “property insurance” or “home insurance”. These protections demonstrate how the potential of this policy goes beyond the limited domestic context and also extends to areas such as school or work.
2 – The fire and explosion policy
In insurance jargon, all property damage is grouped under the risk of “fire.” But, to give an idea, the fire branch also covers water damage, which has little to do with fire.
This section also provides for a very long series of very specific guarantees, in turn, divided into different cases. Thus, for example, the “Electrical phenomenon” guarantee is provided only if the electrical phenomenon originates from some particular causes. It is an example of the “little things” that make a home policy adequate or not to the needs of the contracting party.
The fire section is also divided into two areas of competence. Building fire policy, which covers the property and has some points of contact with the global buildings policy. Content fire policy, which covers the assets inside the home.
The fire section provides for an insured sum, which corresponds to an estimate of the value of the cost of rebuilding the property.
3 – The Legal Protection policy
The branch of legal protection is a novelty in recent years. However, the possibility of defending oneself in criminal and administrative matters has become a more widespread family need than in the past.
Within the property’s insurance, this coverage represents the complementary part of the Civil Liability policy, which does not cover the criminal legal sphere.
4- Theft policy
Although a family’s priorities usually relegate the coverage of this policy to less importance, many homeowners are interested in protecting themselves against home burglary.
This section also provides for an insured sum, which can result from a documented appraisal or a declaration from the policyholder.
It is important to consider that it is up to the policyholder to document the theft and prove it when an accident or theft occurs.
How to buy the home protection you need and not the one they want to sell you
As we have said, before starting your wallet, it is essential to understand what you need. A policy is not good because it covers everything, but because it presents a sensible balance between costs and benefits. So, insuring the house for everything is an uneconomic choice in its deepest sense. This is because we would also end up paying for something that we don’t need.
It is necessary to keep in mind some general principles that can help us make our choices more consciously, without stopping at the “advantages” of this or that policy described in advertising language but by deepening the contents of each contract.
You may also like to learn more about Family life insurance.
Deciding what to insure: frequency and severity
The purpose – also and above all social – of the institution of insurance is to guarantee social stability even in the case of “claims.”
The objective of our comprehensive insurance coverage must therefore respond to objectives of personal stability.
In a home policy, it means making sure of the adequacy of the guarantees for this type of risk. For example, water damage and the electricity phenomenon, two of the most frequently paid claims ever. By “ensuring the adequacy of collateral,” we mean simply verifying that the indemnity limits make sense.
Frequency, on the other hand, means how often a certain event occurs. Therefore, the price of the policies is also based on this element.
Frequency and severity are two very important criteria in writing a policy contract. A bad policy is a policy that keeps the guaranteed payments low to keep the price low.
Understanding the right price: ceilings and indemnity limits
The “ceiling” is the highest amount that the insurance company pays the policyholder upon the occurrence of a certain event.
The liability insurance policy is usually underestimated because it does not happen to everyone involved in a civil lawsuit. Nonetheless, it remains an essential coverage in our opinion because the compensation imposed here is usually very high. Hurting someone inadvertently causes more than one family to become indebted for life every year.
The “sum insured” instead represents the value of the new reconstruction of the house (which is not the purchase value). It depends on the square footage of the house itself.
The price of the home policy largely depends on this sum. It is not uncommon to come across housing policy quotes at very low costs. In reality, they hide very inadequate insured sums.
Hidden quirks: the consequential expenses
A very important item in any home policy relates to consequential expenses or a particular type of coverage. Costs incurred due to the damage, but not directly related to it, are consequential expenses. For example, if the house becomes uninhabitable due to a fire, consequential expenses are incurred for staying in the hotel. The “demolition and removal of residuals from the accident” is another consequential expense.
These costs can also be very high. It is the job of a good consultant to provide you with a good mix of these tools.
Also learn about how life insurance for parents is helpful to protect your family’s financial existence in case one of the parent dies.
Watch out for the glossary
Finally, an important recommendation concerns the definitions given in the contract. It is always good to be aware of what you are talking about when using specific terms.
The definition of “building” is equally important because it is the basis of the building fire policy, which only covers damage to what remains stationary (floor, walls ..) and excludes damage to the contents.
A good consultant will explain all these details to make you understand your choices better.