The concept of using insurance to protect your home is still relatively new in this part of the world. In most Western countries, for instance, one of the first things you do when moving house, even before the movers arrive, is take out home insurance. Buildings insurance, which pays for the cost of rebuilding the property due to events like fire and subsidence, is a mandatory requirement for anyone taking out a mortgage. But whether buying or renting, most people will also take out contents insurance to protect possessions contained within the building.
Yet, because of a large transitory population, as well as a different legal framework, levels of home insurance are much lower in Gulf countries than in other parts of the world. A spate of recent fire incidents in residential towers in the UAE, however, has put the spotlight firmly on this issue.
Many people considering taking out home insurance often dismiss it because they consider it an extra expense or assume it is expensive. The fact is that neither is true. Home insurance is relatively inexpensive and offers great value, with cover starting from as little as a dirham a day. People also often think that insurance is only needed against fire or theft, which are thankfully rare in this region, but home insurance also covers you against damage caused by such things as burst pipes and leaky air conditioning units, which are all too common.
If you are considering home insurance, you need to be clear about the different types of cover available:
• Buildings insurance covers sudden and unexpected loss of, or physical damage to, your home and the permanent fixtures and fittings within it. It typically covers the damage resulting from fires, storms, floods or water leakages.
• Contents insurance covers the items in your house that are not permanent fixtures or fittings. It covers household goods and personal property such as furniture, jewellery, appliances and clothing, and typically protects against damage resulting from fires, storms, floods, water leakages and theft.
• Some insurers also offer worldwide personal possessions cover. This means that they will provide cover, anywhere in the world, for the sudden and unexpected loss of, or physical damage to, the personal possessions that you own.
A point to note with buildings insurance is to not insure the property for its current purchase value, but rather for the cost to rebuild it, which can sometimes be almost half the current purchase price. This way you avoid over insuring and paying a higher premium than necessary.
When taking out home contents insurance, it is important to calculate the value of your home contents. This can be done by estimating the value of your contents room-by-room. Take photographs and keep an inventory.
For personal items, such as clothes, consider where you shop, calculate an average cost per item and multiply this by the number of pieces you own. Remember that children’s clothing should not be estimated at half as they are priced the same as adult clothing. Do not forget small items like DVDs, books and clothes, which can soon add up to a big amount. Again multiply a single price by the approximate amount of pieces you have.
It is very common for customers to underestimate the value of their home contents. When doing the valuation, think about how much the items cost today, not when you purchased them. If you are not sure, look at products while you are out to get an idea about current prices.
Keep in mind that it is useful to keep receipts for all of your purchases, as it helps when making a claim. Having proof of purchase will allow your insurer to process your claim quicker. In the absence of receipts, photographs are often useful.
Insurers will usually ask you to specify any possessions which you would like to cover that exceed a certain amount (their single article limit), which is often around Dhs10,000. It is important that you remember to declare any items that exceed the single article limit, as otherwise you may find that you do not receive sufficient compensation in the event of a claim. In case you are unsure of the value of an item, it is a good idea to seek a valuation from a professional.
If you travel often, opt for personal possessions cover which protects your possessions while you are at home or away. If you travel for long periods, you will also need to ensure that the possessions cover provided while you are away lasts long enough.
Finally, if your building becomes uninhabitable after damage due to fire or water logging, make sure your policy covers the cost of alternative accommodation for the period it takes to fix the damage.
If you do your research and follow a few simple steps in the beginning, taking out home insurance should be an inexpensive and straightforward experience. Most importantly, though, it should bring you peace of mind that you and your family are protected. Losing your possessions is difficult enough, but having no insurance in place to cover the loss is even tougher.