If you think about health insurance, then when and if needed, the insurance helps you cover the medical bills for not only yourself but also your family.
- If you think about life insurance, then it helps your family or loved ones financially when you die.
- If you think about auto insurance, then, if by any chance your vehicle undergoes big damage, the insurance helps you cover the bills regarding the damage. It protects your vehicle.
- In the same way, ensuring your property protects your property from unfortunate damage or theft. Along with that, it helps the owner or renter or anyone else if the accident injured them. Know more about loans.
Following are the few factors or policies that comes under property insurance
- Homeowners insurance
- Renters insurance
- Flood insurance
- Earthquake insurance
Other than the above mentioned, property insurance policies also included damage due to tsunami, seeping groundwater, standing water, fire, etc. However, they may or may not include extreme situations like war or nuclear accidents, depending on the policy.
Property insurance covers mainly 3 types of coverages
- Replacement cost
- Actual cash value
- Extended replacement costs
There are few banks/lenders who make it compulsory to ensure the property during the tenure of your loan. It is because when they give you a mortgage loan, they analyze and evaluate the property location, value along with resale value, and so on. They give a huge amount of money, and they insist a lot because the insurance will cover at least some amount of the mortgage; after all, they have to protect their investment as well.
Though not every lender insists, it is advisable to ensure your property to protect in case any of the above-mentioned unfortunate accidents occur.
Advantages of Property Insurance
- It helps cover the damage cost that you may not be able to cover on your own.
- It can also cover the cost of replacement or extensive repair of damaged items.
- Paying monthly for the insurance is much cheaper than paying altogether at the time of repair or replacement.
Disadvantages of Property Insurance
- If your home is quite old and easily damageable, insurance can be costly.
- No one can know the future, and so lenders might insist on insurance on that piece of uncertainty.
Things to consider when you ensure your property,
- What is the valuation of your property
- It is easier to insure your property on a ‘per sq. ft’ model. This method or way is way better than insuring your property at the market value or at the value the property was originally bought.
- Should you or should you not insure your household goods?
- You should inspire your household goods as well. Though as mentioned in the above point, it is suggested not to insure these goods at the value it was bought. This is where approximation may come into place because it is not always easy to know the replacement cost of specific items.
- Should you or should you not insure your electronic items?
- You should do that. But consider electronic equipment insurance for this, which is generally termed as EEI. However, its value should match the present-day value.
- What happens in the case of an apartment?
- In this case, you for sure don’t need to ensure the complete apartment complex. But in this case, the society or apartment complex you live in should insure the complex or building at its present cost. This needs to be done because apartment blocks include both the individual apartments and the common areas and amenities.
These are the few basic things to consider before going to ensure your property. Along with that, there are various other methods and policies for cases such as,
- Rented accommodation
- stand-alone structures
- Burglary insurance, etc.
To conclude, one must remember that it is not a legal rule or mandatory factor to insure a property. As mentioned earlier, some lenders insist on insurance, but if you don’t want to, you can always look for the lends who don’t insist on the insurance.
Whether you want to insure it or not and if you do, what type of policy you want to take all depends on your requirements, finances, and credit score. Those three things are also the reason what property insurance, or rather insurance in general, is subjective. And so, it is suggested that you weigh your own pros and cons and do thorough research on the policies before you decide to ensure your property.
But if you do ensure your property, you can either pay the insurance amount as a one-time payment or pay regular premiums as part of your EMI. In the end, the choice is all yours.