For any given person who is lucky enough to still be a home owner in this age of ‘austerity’ the majority of their wealth is likely locked up in the value of their homes. Relatively speaking, home ownership is a low-risk investment compared with stocks, etc. However for home ownership to be profitable, not only do you have to take care of your property but you have to safe guard from other systemically inherent risk. In other words, property damage is expensive and if you aren’t covered by Lloyds TSB home insurance there isn’t much you can do if you do not possess the financial flexibility to fix it.
Homes can be damaged in a number of ways: fire, flood, wood munching creatures (though not beavers—as far as I’m aware) will all cause costly and time consuming repairs to become necessary. Often just the cost of repairing damage will justify monthly home insurance premiums.
One of the most common insurance claims I hear up north is from ‘escape of water’ damage caused by burst pipes over winter. This problem often gets exacerbated as burst pipes seem to happen often enough when the occupant is out of town—the resulting damage having time to accumulate over the days to weeks the occupant is gone.
Imagine it, a tornado comes and phrrrooom, away goes your house. It’s a bit of an extreme example but it does happen. So discuss the peculiarities of your area with your insurance agent—i.e. if you live by a river system prone to flooding, on the side of an active volcano etc. It isn’t often that insurance will cover the whole cost of rebuilding, and indeed insurance against some of these disasters (flooding) isn’t covered under normal home insurance and must be purchased separately. Also riders guaranteeing claims adjusted for inflation and complete coverage (providing the home insurance wasn’t violated in anyway) can be purchased as well.
Even though they can burn down, the great thing about houses is that, at the very least, no one can steal them. No true with the contents of your home; not only can they burn up with a fire, but motivated individuals can walk away with them were they so inclined. Home insurance can cover the cost of these items were they lost to damaged or theft. Though typically home insurance will only cover the cost of individual items to a point. So if you have a really snazzy painting, or Ming vase you are going to have to get it its own insurance.
Protecting from liability
If people get hurt accidentally on your property you as the owner will be exposed to liability. Home insurance will cover the cost of settlements and legal fees (up to a point). However, do be prepared for an increase in your premiums if something like this (knock on wood) does come to pass—so keep your walk ways free of ice and your garden free of hazards.
Peace of Mind
Knowing that you have some recourse should the unthinkable happen to a big chunk of your net-worth will might not make you sleep better, but the stress and anxiety cause by not being covered can contribute seriously to heart disease, depression, etc. etc. And as they say, ‘health is wealth’.