What is property insurance?
Basically, property insurance covers
buildings and their contents against loss or damage as a result of fire,
flood, theft, or a range of other perils. Contrary to popular
belief, property insurance need not just be for homeowners but also covers
businesses and even tenants. In fact, it is for anyone with property
to protect.
However, property insurance is merely a
generic term covering several types of insurance packages that are
specifically tailored for the homeowner, the tenant or the businessman.
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Why the need for property insurance?
Most house owners may not realise it but
they have a homeowner's policy on their house the moment they take out a
mortgage from the bank.
In fact, if you are
planning to buy a house, you would not be able to finance it unless the
lending institution knows you have home insurance to cover the property in
case of a big loss, like a fire.
So let's say
something bad happens (touch wood). A fire breaks out in your
home. Without insurance, where would you get the funds to repair
your house or even buy another one if it is destroyed? And what
about your belongings, the things that you have scrimped and saved for
over the years, only to have them go up in flames one hot night?
What about the big-ticket electrical items that make a home so much more
comfortable? How would you be able to replace them overnight?
Without property
insurance, it would probably take a long time for you to replace
everything - unless you have a sizeable nest egg stashed away in the
vault. And even then, replacing items overnight that you have bought
over several years would definitely put a serious dent in your savings.
And with burglaries
becoming more rampant, what happens if you come home one night only to
discover that someone else has been there before you? And that
trespasser has carted away all your furniture and other personal
items? Unless you have property insurance, it would take quite a
while to financially recover from an experience like that.
Depending on your
policy, homeowners' insurance also provides liability coverage to protect
you from being sued if someone gets injured on your property.
Contrary to popular belief, something like that does not just happen in
the United States, it can also happen here.
For the
businessman, a fire can literally wipe out not only your premises but also
your inventory. Businesses have been brought to the brink of ruin
with just one major fire. And with flash floods becoming a more
common occurrence, you never know when one might hit your area and cause
flood damage.
The businessman's
ability to recover from any one of these disasters would be heavily
dependent on his property insurance. Essentially, property insurance
would protect your business against physical damage to, or loss of, your
assets. Assets, broadly defined, include the area in which your
business operates as well as the contents housed there.
So far, we have
seen the benefits of property insurance for homeowners and
businesses. According to the understanding of most people, property
insurance is generally for these two categories only. However,
experts will be able to tell you that even tenants are better off if they
have some form of property insurance.
For instance, many
young people moving into their first apartment - and even some veteran
apartment dwellers and tenants - may think they do not need home
insurance. After all, they may not have much furniture and they may
assume that their landlord's insurance would be sufficient to cover any
major damage to the unit or house.
They could not be
more wrong.
If you are a
tenant, it is best to read your tenancy agreement just to be clear about
who - whether you or your landlord - would be responsible for any
potential property damage. If the contract says you are responsible,
it would be more prudent to get some sort of insurance coverage.
However, more often
than not, the landlord would have purchased the necessary insurance to
cover his property. But even if you are just renting, would you be
able to afford to replace all your possessions out of your own pocket?
While you might not
think you own much of value, it all adds up. Probably your CD
collection alone, built up over a number of years, would cost more to
replace than you could afford. And those chairs that you carted back
from Bali several years ago that are now probably worth 10 times what you
paid for them could all go up in smoke.
While those items
cannot be compensated for in terms of sentimental value, at least you
would not be severely out of pocket if you could be financially
compensated to a certain extent by the insurance company.
And as moving
around costs a lot of money, what with things like rental and utilities
deposits to think about, having tenant's insurance might not be such bad
idea after all.
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