What is the need of building and contents insurance?
Homeowners will recognize building & contents insurance as one of the most common type of insurance, second only to mandatory auto insurance for civil liability or life insurance. Basically, building and contents insurance is insurance against damage of any type to a building and whatever it’s inside.
First thing to take into consideration is that, although, as the name suggests, there is one package which covers both building and contents insurance, most insurance companies will also sell contents insurance only packages. These packages offer leverage on the needs of people who have not yet decided to buy a home, don’t have the financial possibilities to do so or simply do not see the need (students at colleges and universities away from home, temporary workforce displacement, etc.), offering insurance for the contents of the home without the need for that home to be in their property.
It is important to follow these offers of building & contents insurance, with the option of contents insurance only. Generally, if both types of packages are offered, the full coverage is presented as the normal choice, whereas the contents-only package as the savings package, but at a higher price-to-benefit ratio. However, going past the marketing hype, you must consider that regular insurance companies must face the competition of those companies set in the niche of contents-only insurance (smaller companies that offer much better rates or more convenient period or coverage terms). As a result, it is quite common in practice for the contents-only insurance to be, in fact, the normal choice, with an optimum price-to-benefits ratio, and the building & contents package to be the abnormal package.
In order for the marketing to achieve the desired effect in the above situation, though, a certain adjustment must be made to the price-to-benefit ratio of at least one of the packages. Not being able to modify the ratio too much for contents-only packages, companies will instead tweak the ratio for the full building & contents package by offering savings or discounts, or, in some cases, a small extra package at no charge. Marketing the full package as optimum price-to-benefit ratio, it therefore appears that the contents-only package is the none-so-optimum one, when, in fact, the opposite is true.
Second thing to keep in mind is related to some minor benefits of building & contents insurance. Some packages offer some very convenient features, such as new for old replacement (this is applicable only to contents and means that the insurance company will order, after a successful filing of a claim, new products that will match your old ones in brand and model and will deliver them to you), “lost key” features (in the event of you losing your keychain, the insurance company will pay for the replacement of the entire compromised security system), guest policies (insurance covering the goods of guests you may have, and, in some cases, temporary goods or personal effects that might be brought into your home) or EDS (Electronic Data Storage, a form of creating back-up copies of all your documents in an electronic format, most of the times this just means scanning the documents and saving the images in archives on the insurance companies’ servers). Look for all these features and consider which ones you need. Naturally, any such feature will raise your insurance rate, even though insurance companies are now battling over which one to offer the most features at the lowest price. Judge well which ones you really need before entering the policy.
Last thing to look after when purchasing such insurance is legal cover. In many liability claims, legal cover (especially incremental instant cover) is a blessing for the insured. It will cover legal costs for claims of liability, regardless of their direction. Consider that the main reason why civil claim lawsuits are avoided is their high cost, and it becomes easy to understand how such a term in the insurance policy suddenly becomes very useful in case something bad does happen.
Apart from these few tips when purchasing building and contents insurance, keep a clear head, research the market and trends well and use common sense when making decisions and you may end up with a great bargain.