When money is tight and the family finances are stretched to breaking point, cancelling what appear to be unnecessary bill payments such as insurance policies could look like a great idea. But although you might save some cash in the short term, it could end up costing you everything in the long run if something calamitous happens.
What is Home Insurance?
There are two main types of home insurance:
- Buildings insurance – If your home burns to the ground, Buildings Insurance will pay out for a new one to be built.
- Contents insurance – Contents Insurance will pay for the cost of replacing furniture and your personal belongings, assuming you have enough insurance cover.
Why You Need Home Insurance
There are many reasons why home insurance is important.
- Mortgage requirement – If your home is being financed by a mortgage company, the company will insist that you have enough Buildings Insurance to cover the cost of rebuilding the property in the event of a disastrous event. But even if you own your property outright, it is still prudent to have Buildings Insurance. After all, you never know when a lump of space debris might land on your roof.
- Accidental damage – Another good reason to invest in home insurance is because accidental damage is common. Some people are lethal with a power drill and all kinds of problems occur when they decide to carry out a spot of DIY. So if your other half accidentally punctures a water pipe whilst trying to put up a shelf, at least the insurance company will pay for the damage to be rectified.
- Burglaries – Some parts of the world are a high risk for burglary. If you happen to live in one of these areas, some kind of contents insurance is very important—particularly if you own lots of valuables. But even if you don’t live in a high risk area, contents insurance is still useful, just in case an opportunistic thief strikes.
- Act of God – Floods, earthquakes, lightning strikes, and any other type of natural disaster could be regarded as an Act of God. Buildings and Contents insurance will protect you from the financial consequences of a devastating flood or a land slide. The insurance company will pay for repairs, arrange for alternative accommodation, and give you money to cover the cost of your possessions.
- Peace of mind – In an ideal world, you won’t ever be burgled and your home will never end up swamped under five feet of filthy flood water, but at least you can enjoy peace of mind if you have buildings and contents insurance cover in place that whatever happens, you will be able to replace your precious belongings.
Insurance cover is very easy to buy. Most major insurance companies offer their policies through online brokers, but if you have special requirements, it is probably a good idea to talk to an income protection insurance advisor. The most important thing to remember is to always ensure you have the correct level of cover.