Home insurance helps protect your property…and may also cover the things you value in your home.
We often use the terms ‘home insurance’ or ‘household insurance’ in a general way to refer to insurance that covers both home and belongings. However, most of the time, insurance cover for buildings is separate from the insurance cover for the actual contents of the building and it should not be taken for granted that a building policy automatically covers the contents as well.
Typically, home insurance policies are split into separate sections – ‘buildings’ and ‘contents’ – and therefore you may not necessarily be covered under both sections. However, this does not mean that you must buy both types of insurance cover from the same provider. It is also possible to buy a ‘contents only’ or a ‘buildings-only’ policy. You are encouraged to inform your insurer of any material changes to your contents or buildings, including the sums insured.
Buildings Insurance
Buildings insurance covers the structure of the building, plus permanent ‘fixtures and fittings’ such as baths, fitted kitchens, windows and doors, etc. The buildings insurance type of policy is typically required by banks when purchasing a property and it will be no longer in force once the loan is repaid.
If you are unsure about whether something is covered under your buildings insurance policy, you need to check whether an item can be reasonably removed and taken to another residential property.
Contents Insurance
Household items that can be moved from one property to another will not generally be covered by a ‘buildings’ policy, but will need to be covered under a ‘contents’ policy. Contents insurance usually covers any items which can be taken from one residential property to another, for example, furniture, TV sets, rugs and carpets, paintings, jewellery, etc.
While it is generally easy to determine whether an item is part of the buildings or part of the contents, in some cases, this is not immediately apparent.
You are encouraged to ask your policy provider for information regarding the different policies available and the coverage offered under each policy. Having all the necessary information will help you choose the insurance cover which best suits your needs.
What is home insurance?
Home insurance provides coverage in the case of loss or damage to your property and/or the contents of your home as well as liability for injuries and damage you cause to third parties arising from your home ownership or personal liability.
Can I own a home without a home owners’ insurance?
You can legally own a home without a home insurance. But, if you buy your home and finance the purchase with a home loan, your lender will most likely require you to get home insurance cover. The reason for this mandatory requirement is that lenders need to protect their investment in your home in case it burns down or is badly damaged by a disaster.
After your home loan is paid off, no one will force you to buy home insurance. But it does not make sense to cancel your policy and risk losing what you have invested in your home.
Which are the types of home insurance?
A home insurance can be:
- A Building Insurance covers you for damage to buildings;
- A Contents Insurance covers you for the loss of or damage to the contents of your home;
- Personal accident/liability insurance to cover the policy holder and the household;
- “All Risks” Insurance covers you for loss to, or damage to, your personal possessions.
Other options are also offered: if you are interested ask your insurer or insurance intermediary about them.
You may choose to insure the buildings only or the contents only or both. You may also choose to buy further optional covers available as shown above. These often vary from one insurer to another.
What are the perils or events insured against under a Home Policy?
Normally, the policy would cover any loss or damage caused by:
- Fire
- Smoke
- Explosion
- Lightning
- Earthquake
- Theft
- Storm
- Flood
- Subsidence
- Cost of replacing locks and keys
- Falling trees
- Breakage or collapse of aerials
- Riots, Strikes, Political disturbances
- Malicious damage and vandalism
- Escape of water from burst pipes or tanks
- Leaking oil from heating systems
- Impact by aircraft, vehicles or animals
Check your insurance policy for the “perils” or “risks” covered as these may vary slightly from one insurer to another.
There is no such thing as “Act of God” in an insurance policy. The risks for which you are covered are clearly listed in your policy. Any risk which is not mentioned or listed is excluded and therefore your policy does not cover you.
There are various additional covers under both buildings and contents cover. Check these with your insurer as they may vary.
The cover for certain risks such as theft or water damage is suspended if the building is left unoccupied for more than a specified period of time. Ask your insurer for exact details. Better still, refer to your policy.
What is the meaning of ‘Sum Insured’ in a home policy?
The sum insured is the total amount of money for which you are covered. It is the maximum amount your insurers will pay for all the claims arising out of one occurrence such as a fire or an explosion. It is very important that this sum is sufficient because if you are under-insured, claim payments will be reduced by applying what insurers call average. Your claim will be reduced proportionately. Therefore if the Sum Insured is only 80% of the total cost, you will only be paid 80% of the claim. You will have to bear the balance of the loss yourself.
How do I calculate the value that I should insure my home for?
Reassessing the sum insured can be very daunting especially in the case of large properties. Under the “buildings” section, you are insuring the actual structure of your home and this includes garages, any outbuildings, greenhouses, patios, terraces, swimming pools, driveways, walls, gates and hedges. It also includes fixtures and fittings which are all those things you would not take with you if you moved, such as bathrooms, doors, windows, tiling, air conditioners and generally speaking kitchens, although these may sometimes be included with contents.
Therefore, in calculating the value, you must cover the cost of rebuilding your home at current construction costs. The value of the land must not be included and you should not take the price you paid for your home or the current market value you expect if you were to sell it. Don’t forget to add an extra amount to cover demolition costs, architects and surveyor’s fees.
Under the “contents” section, you are insuring all the items in your home such as furniture, household appliances, carpets, linen, radios, videos, hi-fi equipment, cameras, home computers, sports equipment, cameras, jewellery, furs, clothing, personal money and other valuables. You can even extend to insure food in your freezer.
There are specific items that cannot be included, such as, amongst others, motor vehicles, boats, trees, bushes and plants, property used for business purposes. The policy will list these items. Check it carefully.
This contents section is generally covered by insurers on a New for Old basis and you must therefore calculate a Sum Insured that will provide you with enough money in the event of loss or damage to replace all the contents of your home as new. The insurer will pay you the full cost of repairing damaged articles or the cost of replacing them with equivalent new articles if they are stolen or destroyed.
If the cover is on an indemnity basis a deduction will be made from your claim payment to account for wear, tear and depreciation.
Certain items under the contents, such as works of art, jewellery or other valuables, may be subject to a limit. This is usually expressed as a proportion or percentage of the total Sum Insured under household contents. You may find these limits too low for your particular needs and your insurer may agree to raise the normal limits. In certain instances you will be required to get the item appraised and to present the valuation to the insurer.
Always read your policy carefully and look for the section about Claims Settlement Basis. Enquire what happens if you do not wish to rebuild the property or to replace any particular item as practices may vary between one insurer and another.
Remember that the buildings, contents and certain other sections of the home policy may be subject to an excess which is the part of the loss you will pay yourself. Make sure you know what excesses apply.
How do I take a home inventory, and why?
Would you be able to remember all the possessions you have accumulated over the years if they were destroyed by a fire? Having an up-to-date home inventory will help you get your insurance claim settled faster and help you purchase the correct amount of insurance.
Go through your home, from room to room and make a list of your possessions, describing each item and noting where you bought it and its make and model. Clip to your list any sales receipts, purchase contracts, and appraisals you have. For clothing, count the items you own by category – trousers, shirts, coats, shoes, for example – making notes about those that are especially valuable. For major appliances and electronic equipment, record their serial numbers usually found on the back or bottom.
Ask your insurer or intermediary to provide you with a chart that you can use to establish the right amount to insure.
Do not be put off!
If you are just setting up a household, starting an inventory list can be relatively simple. However, if you have been living in the same house for many years the task of creating a list can be daunting. Still, it’s better to have an incomplete inventory than nothing at all. Start with recent purchases and then try to remember what you can about older possessions. Here are some suggestions:
- Valuable items
Valuable items like jewellery, art work and collectibles may have increased in value since you purchased them. Check with your agent to make sure that you have adequate insurance for these items. They may need to be insured separately.
- Take a picture
Besides the list, you can take pictures of rooms and of important individual items. On the back of the photos, note what is shown and where you bought it or the make. Do not forget things that are in closets or drawers.
- Use a personal computer
Use your PC to make your inventory list. Remember to keep a back-up of the information you have stored on your PC.
- Storing the list, photos and back-up e-storage
Regardless of how you do it, keep your inventory along with receipts in your safe deposit box or at a friend’s or relative’s home. That way you’ll be sure to have something to give your insurance representative if your home is damaged. When you make a significant purchase, add the information to your inventory while the details are fresh in your mind.
What is covered under the Third Party Liability section of my Home Insurance?
This section covers you and your family members against legal liabilities, as an owner, tenant or occupier of a home, that arise if an accident causes bodily injury or property damage to a third party. This cover applies in and around your home and is subject to a limit.
The buildings section covers your liability as the owner of your home whereas the contents section covers you as the occupier of your home.
What does the option of ‘All Risks’ cover for Personal Possessions offer me?
An “All Risks” cover protects you against loss or theft of or an accidental damage to your personal valuables both inside and outside your home. Some insurers may extend cover to other countries as well.
Personal possessions that may be insured in this manner include photographic equipment, musical equipment, sports equipment, watches, jewellery, paintings, stamp or coin collections, etc. Look for the definition of personal possessions in the policy to help guide you.
In the case of an “all-risks” policy you can choose which items you want covered and their value. An All Risks cover is cover against accidental damage. Therefore a painting would be covered under your basic contents cover if it is damaged or destroyed by a fire or a flood or any other peril listed in the policy. However under the All Risks the painting will also be covered if it is accidentally damaged, say by spilling something over it. The cover will be subject to a list of exclusions. Check the exclusion list under this section to make sure you understand what is covered.
The items insured under this section above a certain value will be identified on your policy schedule together with the sum insured for each item.
What does the Personal Accident cover option offer me?
This cover provides you with benefits if you suffer an accident anywhere in Malta. The policy will normally pay:
A lump sum if the accident leads to:
- Death
- Permanent total/partial disablement
Or weekly benefits if the accident leads to:
- Temporary disablement
In addition there will be a sum to cover medical expenses following an accident. These benefits will supplement the National Insurance benefits you receive, which are subject to limitations.
Additional living expenses after a disaster
This is a very important feature of a standard homeowners insurance policy. This pays the additional costs of temporarily living away from your home if you cannot live in it due to a fire or other insured disaster. It covers the costs of a reasonable alternative accommodation while your home is being rebuilt.
Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 10% of the insurance on your building.
You should talk to your insurance representative to make sure you know exactly how much coverage you have and how long the coverage will be in effect. In most cases, you can increase this coverage for an additional premium.
What can I do to get a discount on my home insurance premium?
Most insurers offer discounts for improved security by means of an intruder alarm. In addition they may offer a Senior Citizen’s discount and discounts if you have any additional insurance covers with the same insurer.
How often should I review my policy?
There are four events that should trigger a review of your policy:
1)When your policy comes up for renewal – Do not just automatically send a cheque to your insurance company. Take the time to review your coverage and call your insurance representative with any questions or concerns that you may have regarding your homeowners insurance. Ask yourself the following questions:
- Has the company made any changes in coverage since last year?
- Does my policy now include a separate excess for particular risks?
- Should I raise the excess to save money?
- Am I taking advantage of all available discounts?
- Do I need to raise the amount of coverage for liability, personal possessions or the structure?
- Are there other policies on the market which offer cheaper rates – and perhaps offer a better deal?
2) Major purchases or alterations/improvements to your home – If you have made any major purchases, make sure that you have the proper coverage. And, do not forget about gifts. If you have received a diamond engagement ring or if a member of your family has bought you expensive artwork or a computer, talk to your insurance representative about increasing the amount of insurance cover you have for your personal possessions.If you have made major improvements to your home, such as adding a new room, or expanding a kitchen or bathroom, you risk being under-insured if you do not report the increase to your insurance representative. Do not forget about new structures outside of your home. If you have built a room on your roof for a washroom or as a tool-shed you need to speak to your insurance representative. Keep receipts and records in case you need to forward copies to your company.
3) You have made your home safer – If you have installed a fire/burglar alarm system or upgraded your plumbing or electrical system, make sure that your insurance representative knows about these improvements. You may qualify for a discount.
4) Major lifestyle changes – Marriage, separation, or adult children who leave your family home, can all affect your homeowners insurance. When people move in or move out, they take their belongings with them. And you may need additional coverage if there is a sizeable increase in the value of the belongings in your home.
What do I do if I have a claim?
- Contact your insurer as soon as possible. Do not delay as this may prejudice your position. Ask if a survey is required and when a surveyor will be sent. Ask for a claim form. When you receive the claim form complete it with full details and sign it. Submit it to your insurer and keep a copy.
- If you have a liability claim, advise insurers of any impending prosecution you are aware of. Do not negotiate, admit or deny liability with the third party.
- If you are the victim of a theft or your home has been vandalised report it to the police. Get a police report and the names of all law enforcement officers that you speak with. After the police have seen the premises, take reasonable steps to protect your property from further damage and make it as secure as possible. Keep copies of any receipts if costs are incurred for presentation to your insurers.
- If you have suffered water damage, try to minimise the loss or damage by removing the water, shutting off the water supply or start drying out the damaged items.
- Never throw away any damaged items or start repairs without referring to insurers.
- Prepare a list of lost or damaged articles. You are going to need to substantiate your loss. You should also consider photographing or videotaping the damage. Prepare a home inventory, make a copy for your professional surveyor or architect and supply him or her with copies of receipts from damaged items.
- If you need to relocate, keep your receipts. If your home is severely damaged and you need to find alternative accommodation while repairs are being made, keep records of all additional expenses incurred. Check the exact details of the amount of cover you have under this section.
Questions to Ask Your Insurer or Insurance Intermediary about Home Insurance
Home insurance cover can vary from one company to another, so it pays to obtain quotations before you buy. While this list isn’t meant to be exhaustive, it should start you off on the right track.
- What risks/perils are in my home insurance policy? What is excluded from my home insurance policy?
- Are there certain risks or potential hazards to my home for which I cannot buy insurance?
- What things could happen to my property that will not be covered, unless I make special arrangements?
- What are some items that might require additional insurance?
- Am I covered for “walk-in theft” and/or “forcible and violent entry/exit”?
- What is the excess? Give me the price of my home insurance coverage with some different excesses.
- Am I entitled to any discounts and/or is there anything I can do to get a discount?
- On what basis are claims going to be paid? Review the basis you used to calculate the sum insured and ask the intermediary for guidance.
Bonus questions:
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- What kind of liability coverage do I have and how much?
- I am renting out my home to third parties. Does my home insurance cover any damage that such third parties may cause? Will my home insurance protect me if they end up stealing my TV, stereo and bedroom furniture? Do I need special insurance?
