How to choose the best home insurance based on value for money

How to find home insurance that best suits your needs
If you have a mortgage you are obliged by law to have home insurance, but in any case nobody would doubt the need to have good insurance to protect you in case of any incident happening in or out of your home. And since the market offers such a wide range of products, coverage and prices, it is important to know what is important when choosing the best value for money home insurance.
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The most essential types of coverage

As in any other type of insurance, the first thing we should look at is the coverage and services that the product offers. If insurance is cheap, but fails to cover us for an incident at home when we need it, it isn't worth it.

As such, the most basic requirements all insurance should cover against are the most common accidents that happen in the home:

1) Water damage (flood and liquid damage)

Perhaps you're wondering why this is. Well it's simple. It's the most common thing people claim for in the home. Even if it hasn't happened to us personally, we all know someone who's had a water leak at home.

In these cases, water damage can come from leaks or spills from water fittings, tanks, or other devices, or from someone forgetting to turn off valves or faucets. As well as the damage caused by the water, it's important that the costs of locating and fixing broken pipes are covered, as well as any excessive water costs resulting from a leak.

2) Breakages of windows, marble, sanitary ware, and glass-ceramic cooktops

Again, looking at the number of claims, this is the second most common type of home insurance claim.

This coverage guarantees you will be covered for repairs or compensation for breakages of the items listed, provided that the cause of damage is accidental.

3) Damages caused by electricity

As you can imagine, this is the third most common cause of claims in the home.

This covers you against electrical damages caused to electrical facilities and appliances resulting from abnormal currents or network surges to the mains supply.

Until now, we've highlighted the main types of coverage according to the frequency of claims. But there are other considerations we need to take into account to determine the basic coverages home insurance will give you, such as the extent of the damages sustained.

It's important to highlight these two important types of coverage: Fire coverage, and public liability coverage. Here's an example: What would happen if, due to your own carelessness, you forget about a frying pan in the kitchen and started a fire that caused serious damage - not only to your own home, but your neighbor's and the community? Would my home insurance cover all the damages? Let's look at it in detail.

4) Fire, explosion, lightning strike and smoke

This coverage is considered an essential safeguard a home insurance policy should cover. Fire is one of the few incidents that can cause total destruction or ruin of insured goods: arising from both the fire itself, and the smoke. Sometimes there is so much smoke that serious damage can be done to walls and floors, as well as rendering furnishings and belongings unusable.

5) Non-contractual civil liability

This is essential for home insurance coverage, and is probably the most important type of coverage. As homeowners or renters of homes, and on a personal level in our private lives, we're responsible for damage or harm (either material or personal) caused to third parties.

Public liability coverage undertakes to provide compensation to third parties (to the limit of the sum insured in the policy) and also provide for any defense costs for the policyholder, for any damage or harm we cause involuntarily to a third party - provided that we are responsible for causing the aforementioned damages. It's important to consider that this coverage is not limited solely to covering the damages caused to a third party in the home (such as a water leak causing damage to a neighbor), but also to damages we cause to a third party in our private lives.

This could apply to a broad range of cases: for example, your child throws a stone and breaks a car window, or your dog runs away and causes a car accident. What would happen in such cases? Your home insurance – through its public liability coverage - would cover these damages, and would take care of compensating damaged third parties. For this reason, and 'for whatever might happen', it's advisable to take out an insurance policy that covers Public Liability, for a minimum of €250,000. Here are some other useful types of coverage:

6) Weather damage

(Heavy rain, strong wind, hail, or damage caused by the weight of accumulated snow) Every day we hear more and more news stories of natural disasters: major snowfalls, floods, strong gusts of wind, hail, etc. And even though the vast majority of home insurance products cover us against them, the minimum limits they cover can vary. For example, the minimum wind speed for damages to be covered could be set at 70 Km/hour or 85 Km/hour, etc. It's therefore advisable to take these figures into account.

7) Damages caused by theft

This coverage will compensate you for the value of goods taken or stolen from your house, provided that there's been a forced entry or violence or intimidation against a person/people. You would usually also be covered against a mugging outside of the home and, in some policies, against theft (unlawful seizure of goods without force, or violence or intimidation against a person/people).

This type of claim is the one most likely to cause the policyholder to feel vulnerable. Someone breaking into your home while you sleep, or a violent mugging in the street, can cause you to feel extremely unsafe. That's why it's important to have insurance that helps you overcome the losses and damages brought about by these difficult situations, and have a product that covers you for the repair of any damage to your home (for example getting a locksmith to fix the lock a thief has forced to try to access the home).

8) Legal protection

This is one of the types of coverage that may pass you by when you're looking at taking out home insurance, but it can be very useful in the event that you need legal protection in your private or family life. The service offers judicial and extrajudicial legal assistance, as well as support in coming to amicable agreements, or for extrajudicial claims in defense of your interests. And depending on the policy you choose it may provide other safeguards. For example, you can use this coverage to demand compensation for damages caused to you by another person.

9) Additional services

It's also important to know what other services the home insurance you choose can offer you - ones that don't see you sustaining any harm or damage - that give you added value. These services cover necessities such as carrying out basic home improvement jobs in the home.

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The cost of home insurance

For the most part the actual cost of an insurance policy depends on the coverages offered and the capital (sums) we agree for the building structure (fixed structure of the home) and the contents (pieces of furniture, household appliances, clothes, etc). There are also other factors associated with the characteristics of the home that will have a major impact on the cost of your insurance. The main details insurance companies will consider when giving you a price are:

  • Tenure status: Tenure status defines the relationship between the policyholder and the insured home (owner or tenant).
  • Housing use: Insuring a habitual residence, where you spend every day, and therefore are more likely to have incidents or accidents resulting in a claim, but on the other hand will adequately maintain; and insuring a second home which you only use for vacations and where something could have happened without you even realising until you arrive, are two entirely different things.
  • Size: In terms of square meters. The larger our home, the more the insurance will cost, given that replacement costs will be higher in the event of a claim.
  • Age: As a general rule, older real estate is more expensive to insure: its facilities (especially those relating to water pipes and electricity) are more likely to cause problems or faults that lead to claims (water damage, fire due to electrical faults, etc.). But if all the water, gas, and electrical facilities in an old building have been fully updated, it could reduce the cost.
  • Location: The policy cost also depends on where the house or apartment is located. Real estate in depopulated areas or in areas with danger of severe weather are more costly to insure.

There isn't much we can do to change the factors directly related to our home's inherent properties. However, what we can do is choose a kind of insurance that is suited to our needs and the features of the home we want to insure.

Insurers usually have several types of insurance available. You will have a package of basic safeguards to which you can add additional levels of coverage, giving you the opportunity to choose a better, more comprehensive type of insurance. This is key when it comes to choosing the best value home insurance. Only take out the coverage you'll need, based on your essential requirements and the type of home you're insuring.

Moreover, when choosing insurance, the amount of coverage included is very important, as is the scope and the maximum indemnity offered by each one. For example, for certain types of coverage you need to have high levels of capital (for example public liability coverage) and for other types (the ones that are claimed on more often) it's important to know whether an excess applies - it could end up being an extra payment for every claim you make.

We must also consider any modification or improvement that we make to the house to improve security, such as reinforced doors, alarms or a surveillance service, which could help to lower the cost of insurance. Another way to save is to group insurance policies together by using services such as the BBVA EstarSeguro Plan. This way you will receive discounts and other benefits, such as payment in installments without increasing the price.

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