Insurance Needs When Buying and Selling Real Estate
In the process of buying and selling real estate, you should consider insurance as one of your priorities. Once you have purchased your new home, you should take out insurance to protect your investment. So how much coverage should you have on your new home? What does a basic policy cover? What happens if there is a fi re or fl ood? You should take out a cover note on the day you settle on the property. If you are building a home, you should ensure that they are covered from the day construction begins.
There are basically two levels of insurance cover:
• Replacement cover – reinstates your property to its former condition in the event of its being destroyed, i.e. new for old. Do not confuse replacement value with how much you paid for the property. A home bought for THB 4,000,000 may cost THB 6,000,000 to replace. It is much cheaper for a builder to build several houses at a time, than to construct just one.
• Indemnity policy – reinstates or repairs the property but depreciation is taken into account, i.e. old for old. You will only receive a portion of the amount it would require to replace it.
Unlike car insurance, there is little that is standard about home insurance. Premiums can vary greatly depending upon the size of your home, its features and location, and the construction material. Do you have a security system, keyed locks on all windows and doors?
Many insurance policies in Thailand do not cover your properties against “Acts of God”, such as lightning, hail, earthquakes and floods. It is important that you check your policy carefully before an unexpected event occurs.
Depending upon your policy, the coverage is replacement value or actual cash value. For example, if your THB 8,000 sofa is destroyed, full replacement ensures a new sofa. Actual cash value would only give you the depreciated value, say THB 6,000. Not surprisingly, full replacement policies are more expensive than cash value policies. In many cases, the contents of a home are valued at 50% of the structure’s replacement value, e.g. on a THB 4,000,000, contents could be as high as THB 2,000,000.
Bear in mind that the standard content policy in Thailand does not cover you against burglary and theft of your valuables, e.g. video recorder, computer, jewelry- for those items you will need a burglary and robbery (special risks) policy. It is a good idea to keep receipts for major purchases and detailed inventory records for insurance purposes.
In order to cover your valuables against burglary and robbery, it is advisable to take out a ‘Special Risks’ policy. For this type of insurance coverage, you will need to provide a detailed list of all items to be included. As well as keeping receipts for major purchases and detailed inventory records, many companies recommend taking video records or photographs of your valuables.
Limit your small claims: pay for minor losses yourself and rely on your policy for more serious, expensive claims.
Check out the various ways to improve your home security.
Your possessions should be insured under your existing policy at your current home and should be covered again when you have moved into your new home and have notified your insurer. However, they are usually not covered during the move between the two locations.
Check whether your removalist offers ‘in transit’ insurance cover as part of their quote. If not, ask them to arrange it for you or take out a policy yourself.