Insurance

Home insurance, or homeowners insurance, is an insurance policy that combines various personal insurance protections which can include losses occurring to one's home, its contents, loss of use (additional living expenses resulting from damage to your home), loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home.

Homeowners cannot afford to be without homeowners insurance. If you are fortunate, you will never need to collect on the policy, but carrying insurance is certainly worthwhile, since not having coverage may be catastrophic in the event of an emergency. Although homeowners insurance policy premiums are often high, they pale in comparison to the costs you might face without the benefit of insurance.

Homeowners insurance is so important that lending institutions in Bermuda require the purchaser to acquire a certain amount of coverage before issuing a loan for the purchase of the property. The standard Sale and Purchase Agreement stipulates that it is the seller's responsibility to insure the property until the conveyance, but thereafter the purchaser is responsible.

Most lenders in Bermuda will not release mortgage funds until you provide evidence that the property will have proper coverage upon completion. Indeed, banks often insist that their interest in the property be recorded on the policy. The mortgage lender requires that the buyer purchase homeowners insurance as a condition of the loan to protect the bank in the event the home is destroyed. Additionally, because the lender has a vested interest in the property and wants to ensure full financial compensation in the event of a disaster, homeowners may find themselves in default of their loan if they fail to carry the level of coverage required by the lender.

How much Insurance is enough?

You should buy enough insurance to cover the cost of rebuilding your home at current construction costs. Don't include the cost of the land. And don't base your rebuilding costs on the price you paid for your home. The cost of rebuilding could be more or less than the price you paid or could sell it for today. For a quick estimate of the amount of insurance you need, multiply the total square footage of your home by local building costs per square foot. To find out construction costs in your community, call your local real estate agent, architect or insurance agent.

You may be able to save hundreds of dollars a year on your policy by shopping around. You may want to bear the following tips in mind as well:

• Ask your insurance agent about discounts. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system or storm shutters. People over 55 years of age or long-term customers may also be offered discounts.

After your mortgage is paid off, no one will force you to buy homeowners insurance. But it is not advisable to cancel your policy and risk losing what you’ve invested in your home.