Home insurance: How to choose yours in 2021
Buying a property is one of the biggest investments a family can make. It usually requires a lot of planning and years of savings. So, why not protect it with home insurance?
Although is quite used to auto insurance, he still has no tradition of contracting home insurance. Among the reasons are the belief that it is an expensive product and little knowledge about what can be covered in such a contract.
But the fact is that home insurance can be interesting to guarantee indemnity in case of unexpected damages to your assets. In this article, we will explain how this product works for you to assess whether you need to hire yours.
First, the most important
- Home insurance is insurance intended for individual residential properties, such as houses and apartments, whether in regular use (permanent housing) or seasonal (such as vacation homes).
- Upon the collection of a pre-established amount, the insurer undertakes to indemnify the contractor for the occurrence of certain events or for any losses provided for in the contract.
- The policy is generally valid for one year and can be renewed at the end of that period.
The best home insurance: Our recommendations
To protect your assets, it is important that you have an insurer with experience, financial strength and market recognition. So researching among the largest in the industry can be a good start.
The union that brings together insurance brokers from the State of São Paulo, Sincor SP, annually publishes a study with the ranking of the largest insurers in the country. ( 1 ) We have separated some of the big companies to serve as a reference for you.
- The largest company in the insurance market
- The largest independent insurance group
- Reference in services
Hiring Guide: What you need to know about home insurance
Home insurance still has low penetration in the market, with less than 15% of insured homes, according to data from the National Federation of General Insurance (FenSeg). But that percentage has grown.
The increase in the incidence of climatic events such as lightning and gales, which affect homes and cause losses, and the greater dissemination of the product by insurance companies guarantee growth, in the assessment of the president of FenSeg’s Massive Property Risks Committee, Jarbas Medeiros.
The recent economic crisis, with an impact on the number of thefts and thefts, is also considered a factor in stimulating the purchase of home insurance, although not all products cover this type of damage. Check out the main characteristics of this sector below.
What does home insurance cover?
The basic coverage involves damage caused by fires, lightning strikes and an explosion caused by gas used in domestic use (when not generated in insured locations), according to Susep.
Basic coverage involves fire, lightning and explosion.
It also involves the consequences of these events, such as landslides, expenses with fire fighting, salvage and debris from the site.
This is the minimum mandatory coverage and, therefore, the cheapest. It is also possible to contract additional coverage of various types, which will depend on the contract negotiated with the insurer. These additional coverages can make a big difference to the final insurance price.
Below are some of the additional coverages available on the market:
What does home insurance not cover?
Non-compensable damages and goods not covered by insurance vary according to the insurer and the product chosen. Everything must be described in the policy.
Some indemnities not provided for in the basic policies may be contracted as additional coverage. However, some risks are often left out of the coverage list.
An example is the risks associated with construction failures. If failures in the construction project or poor quality material used in the work cause damage such as infiltration, premature wear and humidity, the insurer may not cover the losses.
Likewise, risks related to pre-existing defects are usually left out of coverage.
“If you become aware of defects in your property that already existed before taking out the insurance and do not inform the insurer, the company may deny compensation for damages caused by them.”
Damage that occurs during long periods of vacating the property when there is no prior notice to the insurer can also be left without coverage. Therefore, it is important to notify the insurer if you are going to be away from home for more than 30 days.
When contracting insurance, it is important to be aware of all specifications in the policy.
Who is home insurance for?
Anyone who owns a residence and wants to keep it protected can take out home insurance. To do this, you can contact the insurance company directly or seek an insurance broker to assist you in this process.
Who lives in an apartment, know that the condominium is already obliged to have insurance for the building structures and common areas. In that case, you can look for a product to insure your unit. But before hiring, check what is already included in your condo’s policy.
Rental contracts also provide for insurance, usually basic coverage. If you live on rent, you can also take out supplemental insurance for your assets.
How is the cost of home insurance calculated?
Contrary to what many people think, the cost of home insurance is not based on the commercial or resale value of the property. That’s because even if your home is completely destroyed, you still have the land to rebuild your home. Thus, the value of the land does not enter into this account.
The calculation, therefore, refers to the sum of the cost of reconstructing the property and the replacement value of the assets. The reconstruction cost can be obtained by multiplying the built area (m²) by the unit cost of the m² of construction in the region of the property. The insurance broker can help you determine that amount.
To determine the replacement value of the goods, it is necessary to survey the cost of objects, such as furniture, appliances and electronics, which will be covered.
This survey is generally simple, done by the person interested in taking out insurance, but in some cases it can be estimated after the insurer’s expertise.
It is important to notify the insurer whenever you purchase a high-cost asset, which can significantly influence the insured amount, in order to provide for policy modification.
Hiring Criteria: What to consider when hiring home insurance
Because of the large number of insurers and different products, it is necessary to carefully analyze and compare the options available before hiring. We made a list with the main criteria to be observed:
- Service package
Check each criterion in detail below.
Home insurance can be quite personalized. So, an important factor to consider is what type of additional coverage you need or would like to have on your policy. To do this, assess the risks to which your property is exposed.
For example, if you live in a location with a high incidence of home theft, it may be a good option to add the asset subtraction coverage (explained earlier) to the mandatory basic coverage.
If you live in a region where there is a lot of climate change and a lot of wind, the probability of your roof being damaged by strong winds is great. Therefore, you can add coverage for damage from natural causes. Check out more about weather events in this video:
In addition, if you have domestic employees, for example, it may be interesting to consider hiring Family Liability coverage against damage caused unintentionally to third parties.
Even including additional coverage, insurance may not fully compensate for damages. The amounts insured and to be indemnified are always provided for in the contract.
In order to make home insurance more attractive to consumers and, thus, increase product sales, insurers started offering services associated with the policy.
Among the most common services are locksmith, electrician and plumber.
The services are very varied and generally actionable in an emergency. Among the most common are locksmiths, electrical repairs and hydraulic repairs. But there are also insurance companies that offer water tank cleaning, computer technical assistance, bicycle assistance, pet services and even babysitting and elderly care services.
There is usually a limit to the use of these benefits. A more basic package, which can even be offered at no additional cost by the insurer, will have fewer services included and a greater limitation on their use.
A more sophisticated package can include a wide range of residential assistance and repairs and you can use it more often during the year. This, therefore, will be more expensive than the previous one.
It is important to evaluate this package well before hiring your insurance, so that you have the necessary assistance, but do not pay for services that you will never use.
Another determining factor in contracting home insurance is, without a doubt, the price. Although many fear the cost of home insurance, it is usually relatively cheaper than auto insurance, for example.
While auto insurance averages around 5% of the vehicle’s value, home insurance generally doesn’t even reach 0.5% of the insured value, according to experts.
In addition to coverage, services and insured value in general, other items that influence the price of insurance are the location, the type of property and how it is used.
Insurers may charge more for property insurance located in high-risk regions, for example. In addition, the insurance of a house is usually more expensive than that of an apartment, since the buildings already have insurance for its structure.
A vacation rental property can also be priced higher than a regular home, as the likelihood of claims in an unoccupied home for a long time may be higher. On the other hand, installing security systems and equipment in your home can contribute to cheaper insurance.
Did you know that location, type of property and how it is used have an influence on the price of insurance?
As with auto insurance, the deductible is a value that represents the part of the loss that must be absorbed by the insured in cases of accident.
f the amount of damage suffered is less than or equal to the deductible, the insurer will not indemnify the insured.
The existence of the deductible tends to reduce the amount to be paid for insurance. However, you will have to make an extra disbursement when claiming compensation.
Thus, when looking for home insurance, research whether the options you have selected have a deductible or not, and what is the amount involved.
Home insurance is a way to guarantee compensation in case of unexpected damage to your home. Because it is a very flexible product, it is possible to hire from very basic coverage to a very comprehensive set of protections.
But before choosing yours, you need a good search. In addition to comparing coverage, services and prices, be sure to confirm that the insurance company is regularly registered with Susep. And carefully read the general conditions of the product, especially the coverage exclusions, before closing the contract.
- Policy : Insurance contract. It contains all important information, such as contracted coverage, price and duration of insurance.
- Indemnity : Payment that the insurance company makes to the insured in the event of a claim with losses covered by the policy.
- Premium : Price to be paid by the contractor to the insurer so that it assumes the risks described in the policy.
- Claim : Occurrence of one of the risks covered in the policy, which will give rise to the indemnity. It must be reported immediately to the insurer.
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