Home insurance isn’t required by law, but it’s often required when you take out a home loan. There’s a lot to think about when choosing a policy, including the types of cover you need – which is challenging if you’re not up to date on the terminology. Here are the terms to know when comparing and choosing home insurance policies.
Cover and policy types
Additional living expenses: cover for temporary housing, food and other living costs while your home is temporarily uninhabitable. All-risk policy: covers damage caused by all perils except those specifically listed as excluded. Named-peril policy: covers only the perils specifically listed (such as fire, flood or storm). Liability cover: protects you financially if someone is injured on your property, or their property is damaged there. Property cover: protects against loss or damage to your property and land.
Costs and payments
Premium: the amount you pay your insurer, usually monthly, to be covered. Deductible (or excess): the amount you pay towards a loss before the insurer contributes. Lapse: termination of your policy if you don’t pay your renewal premium by the end of the grace period. Inflation protection: cover that adjusts your policy limits to help meet rising repair or replacement costs.
Value and claims terms
Appraisal: the evaluation of your property’s value, or the value of damaged property, for a claim. Depreciation: the decrease in your property’s value over time from wear and tear and other factors. Market value: the combined value of your home and your land. Replacement cost cover: pays to replace damaged property (or personal property lost or damaged) without deducting for depreciation.
Policy documents
Declarations page: the page summarising the whole policy – the insured person’s details, the cover provided, the cost and the effective dates. Endorsement (or rider): a written agreement attached to the policy that expands or limits your benefits. Exclusion: anything specifically listed as not covered, whether certain people, property or circumstances. Real property: your land and anything permanently attached to it. Becoming familiar with these terms will help you better understand the policy you choose.