INSURANCE . RETIREMENT . INVESTMENTS
Home and Contents Insurance policies provide you with the peace of mind that your place of abode and your belongings are covered in the event of peril. As we are in the rainy season, now more than ever it is important for you to re-evaluate your policies and ensure that they are up to date so you have one less thing to worry about.
Here are 5 things to consider when re-evaluating your Home and Contents Insurance Coverage:
1. Inflation – The value of your home is not fixed and is based on the current levels of inflation in your economy. If the inflation level is constantly increasing, then the value of the dollar is now less, leading to a decrease in purchasing power. This decrease in purchasing power means that the value of your dollar is now less, and the value of items must increase in correlation to that new value.
For example, if you purchased or built a home valued at $1,000,000 and inflation increases to 5% the following year, then this 5% increase must now be factored into the value of your home. The new value of a $1,000,000 home at 5% inflation after 1 year would be roughly $1,050,000.
That being said, as your home appreciates in value, your coverage must likewise be re-evaluated to provide added coverage.
2. Renovations – Have you conducted renovations recently or are planning to conduct renovations on your home? Renovations or home upgrades introduce additional value to your home, particularly if you undertake large expansion projects, such as extending your home or changing your roof. These projects make your home more valuable, and this requires you to evaluate your home insurance policy as it would have been created to cover your home’s value pre-renovations. Now with a new value, you need more coverage.
Tip – Consult with your home and contents insurance provider before undertaking large renovations to have an idea of the new costs of your premiums.
3. Personal possessions - Contents insurance covers the value of the contents of your home. This includes, but is not limited to, furniture, appliances, and electronics. If you have purchased new items, particularly expensive ones, such as electronics and appliances, you should consider re-evaluating your policy to extend your coverage to these new additions to your home.
Tip – If you purchase new items every year, then you should consider re-evaluating your contents insurance policy on a yearly basis.
4. Under-valuing and Under-insuring – Don’t undervalue your home and contents! You may consider some of your contents as negligible and not worth insuring in order to obtain a less expensive premium but consider the possibility of losing these items in a fire, flood or theft.
Items like clothing and small appliances and furniture are often ignored when conducting a re-evaluation of your policy, but these items can total quite a bit if they are lost and need to be replaced. Weigh the cost of replacing these items if they are lost, against the new value of your premium if you decide to insure them and decide if it is worth doing.
5. Over-valuing and Over-insuring – As with under-valuing and under-insuring, the reverse also applies with over-valuing and over-insuring your home and contents.
Over-valuing and over-insuring leads to paying a higher premium that is not in line with the required coverage especially when your insurance provider is only obligated to pay coverage that is equal to the market value of your home or your valuables.
Consult with your home and contents provider to obtain a proper valuation of your home and contents and ensure that the sum value reflects the current market value. This would allow you to re-evaluate your policy which should reflect the actual value and prevent you from paying excessive premiums.
Interested in Home and Contents Insurance? Contact Guardian General Jamaica at 878-926-3720 for more information.
Thanks for joining us for this week’s article. Have a safe weekend and join us again next week for more!