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What is home insurance?
Home insurance provides coverage for your home through a variety of circumstances. In essence, you pay a sum of money to ensure that in case of an emergency, your insurance company will pay to rebuild damaged property, rebuy stolen possessions, and cover your expenses at whatever cost your agreement sets. Like your health, protecting your home and its contents from unforeseeable life events are key to safety and security.
What do Argus home insurance policies typically cover?
- Damage by fire
- Damage by lightning
- Destruction by weather
- Burst pipes and water leaks
- Home contents (due to a wide array of perils including hurricane, theft, flooding, etc.)
- Personal belongings of high value that extend beyond the home
- Loss of rent/ rental costs
- Public liability
Understanding your home's "value"
In most cases, the value of your home is constantly increasing so you can normally sell a home for more than what you originally bought it for. What you buy/sell a home for is the ‘market value’ and this number is affected by factors other than just the building itself - such as the location, a nice view, a good neighborhood etc. Many of these features that add to a home’s market value are not insurable.
The market value is different to the value you should be insuring your home for which is the re-building cost.
The re-building cost, in a worst-case scenario of total destruction of your home, is the cost of demolishing the property, removing the debris, costs of planning for a new home and then the actual re-building of your new home. Availability of supplies, both actual building materials and costs of people/skilled trades, fluctuate too, and Bermuda is impacted by what happens overseas. The costs of materials and labour mostly increase. As those numbers go up, the price of upkeep and the coverage for the value of your home also increases (re-building cost) even if the actual market value/selling prices in the home market have decreased. So in some situations you could find that the re-building cost is actually more than what you could sell your home for, such as when there is no demand for buying homes, property prices do go down as well as up. If you happen to purchase your home at a bargain price, the re-building costs may work out to be higher than what you paid.
Knowing the difference between market value and re-building cost is important for a couple of reasons: firstly to make sure there is sufficient insurance cover to build your new home in the event of damage, and secondly to make sure you do not over-insure at a market value that may be higher so you do not pay too much for insurance. Make sure to have your home valued for the re-building cost before purchasing insurance.
The benefits of home insurance after paying off your mortgage
For homeowners, safety is a priority. Despite best intentions, people often let home insurance expire after they pay off the house mortgage, but theft, accidents and extreme weather can still happen, and protecting your house remains just as important, if not more so, after you’ve celebrated paying it off. In fact, as the value of your home goes up or additional changes like renovations are made, it’s wise to look at increasing your insurance to make sure everything aligns, and you don’t risk underinsurance.
What is underinsurance?
If your home is insured for a lower amount than it is worth, in the event of a claim, you may be required to pay large sums of money out of pocket. Attempts at saving money or cutting corners may result in serious financial consequences like taking out another mortgage, placing you far behind your financial goals. Learn more about underinsurance here.
Conclusion
Working with Argus to purchase the right level of insurance, provides homeowners with a sense of safety and security. Our team of dedicated specialists provide not just guidance and support in risk assessment, but also concrete financial benefits for homeowners. For more information, please contact us at insurance@argus.bm