Key Facts to Check Before Buying

Although there are a number of standard packaged insurance policies available, not all insurance policies are the same, and a standard, broad form (HO-2) insurance policy issued by one insurance company can be very different from the same HO-2 insurance policy offered by another. The differences often come as a result of how each insurance company puts together its policy package, along with difference in their underwriting criteria and standards, and customer service.

Here are some of the points you should consider before purchasing a homeowners policy:

HOI and your Mortgage

Until you have paid off your mortgage, your lender owns your home, and will require you to insure it against any damage. Many lenders will offer you their own insurance policy at the time you take out the mortgage. However, they will not necessarily be the cheapest, so compare their rates with other companies before signing up.

Checking the Policy

Make sure you read the policy carefully. An insurance policy is a contract that sets out the legal obligations of both the insurer and the policyholder, so it is essential that you fully understand what you are agreeing to. Ensure that you are aware of the level of cover it provides, and the conditions in which you can make a claim. Remember - if you do not understand any of the points, contact your agent for clarification.

Exclusions

These explain what your policy does NOT cover. You should read your policy to be sure you are clear about what it does not provide.

Deductibles

In the event you make a claim you may be required to pay the first part yourself - this is called the deductible. The amount of deductibles will vary depending on the policy and the claim.

Riders

For an additional premium, you can often widen your policy to cover additional risks, such as accidental damage. This means that you will be covered against accidents such as spilling paint on a carpet, or putting your foot through the attic ceiling.

Replacement Value

Most policies will normally be 'indemnity' or 'replacement as new'. Indemnity policies are the cheapest, because the company will deduct 'wear and tear' from the amount you can claim for each item. The older the item is, the more will be deducted from the value of your claim. These policies are useful for reducing your premiums if you live in a high risk area.

'Replacement as new' policies have higher premiums, but will allow you to claim for the full cost of replacing or repairing an item that has been damaged or stolen. The insurance company will either send you a check that equals the price of buying an identical new copy of the item; or alternatively, they may purchase the items for you themselves.

Accidental Damage

You should also check the accidental damage wording to see what it covers. Does it cover accidental damage to windows and mirrors? Does it cover accidental damage to equipment such as computers, TVs and DVD players? If the cover is not adequate for your needs, you should be able to extend the policy for an additional premium.

All Risks Cover

This is cover for items that you regularly take out of the house, such as cameras or sporting equipment. These items can be listed in the policy under an 'All Risks' section, for which an extra premium is normally payable. High risk items that spend a great deal or all their time outside your home, such like bicycles or caravans, will probably require you to take out specific extensions to your policy.

The Premium

Some insurers will require you to pay your premium in full before cover starts, while others may allow you to pay in instalments (sometimes at an additional cost). If you decide to spread the cost of your insurance, it is crucial to remember to keep up the payments; otherwise your cover will be cancelled.