When you spend a lot of money on something, you want to protect that expense with insurance. That certainly applies to a home. For the vast majority of people with their own home, paying out of pocket to repair a major damage to it would be a (big) problem. The same is usually true of household contents. That’s why you take out insurance. For a house, we then talk about building and contents insurance. By spreading the risk, an insurance company can accommodate such expenses.
Property insurance is usually mandatory
With buildings insurance, you insure any damage to your home. That is, anything actually attached to the home, such as the roof. Damage can be caused particularly by a storm, fire and water damage. If you want a mortgage for a home, its lender will normally require you to purchase buildings insurance. The cost of buildings insurance is determined by the rebuilding value. That value is the cost that would be incurred if a similar house were built new. Based on the average decrease or increase in those costs, the reconstruction value is reset annually, which is called indexing. Figures from the Central Bureau of Statistics are used for this purpose. For example, if you have a dormer installed on your house, it increases the value of your home. Then the result may be that your home is underinsured. This kind of increase in value is not covered by the aforementioned indexing. So you need to take that into account. As with anything you purchase, comparing the coverage, terms and costs of homeowners insurance from various providers makes a lot of sense.
Contents insurance is your decision
Whether you purchase contents insurance is your own decision. There is no party that obliges you to do so. We have indicated with the contents insurance what its coverage is. That is, what is insured. Anything inside the home is called the contents and is not covered by the contents insurance. The causes of damage to contents can be the same as in the case of the home itself. Buildings insurance may cover damage to the home caused by a burglary, but will not reimburse the value of items stolen and will not reimburse damage to the contents caused by a burglary, such as something broken. Because coverage and terms can vary quite a bit, which is also determined by what risk you yourself are willing to bear, home contents insurance comparison in this case is a bit trickier, but very useful.
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