Most everybody understands that insurance is an essential expense and accordingly take out policies for their autos, healthcare and lives. Homeowners’ possessions that are independent of the actual residential structure–such as electronics, clothing and furniture–also typically can be covered under the general home insurance policy.
However, many renters may not be aware that insurance plans exist to protect against losses to their belongings, and if they are aware, may not recognise that renters’ insurance can be a prudent precaution in case of flooding, fire or theft.
“Anybody who has items of value, particularly in an environment such as Cayman where we’ve been through the Hurricane Ivan experience, it would be in their best interest to obtain insurance to protect against loss from any of these perils,” says Michael Gayle, general manager, Cayman First Insurance Company.
Michael says that many renters assume that if the premises is insured, then that insurance will cover the contents of the home.
Usually, he said, that is not the case.
Cayman First’s Key Protector Home Policy offers homeowners coverage for both the structure and contents of their homes.
Renters looking to insure their possessions can then be covered under the same Key Protector Home Policy, just without protection for the structure of the home, he says.
While insurers’ primary concerns are generally hurricanes and the accompanying winds and flooding, Michael warns that other potential hazards are residential fires and localised flooding, for instance, from a burst pipe in the building that results in a couple of inches of water collecting in the home. With crime an increasingly high-profile problem, Michael also notes that Cayman First’s policy includes coverage against burglary, theft and malicious acts of destruction.
“Our policy is a little different in that, realising the concerns that people have about increases in crime, we have partnered with The Security Centre to offer free burglar alarm systems to all of our residential policyholders, whether they are renters or owners,” Michael indicated.
Specifically, Cayman First offers home policyholders free installation of a basic security system, including an alarm and sensors for two points of entry. Alternatively, clients with homes with more than two points of entry–i.e., for a home with four doors–can have a more comprehensive security system installed, and will be given a credit of $499. After installation, the client is responsible for the regular service fees for the security system.
Though coverage has evolved over the years, Cayman First has been offering coverage for homes and possessions since the company’s founding in 1984.
Renters who are interested in obtaining coverage for their possessions can contact a customer service representative, who will take clients through a series of steps to make sure that clients are accounting for the total value of their possessions. “People tend to think of their valuables in terms of electronic equipment, appliances and furniture.
People tend to overlook the replacement cost of their clothes,” Michael says. “Then if you have a bit of flooding and the clothes closet is flooded, along with 20 or 30 pairs of shoes, you’ll find that alone can run you into losses of several thousands of dollars without you even realising it–to the extent that you may find yourself underinsured,” advised Michael.
Being underinsured, or not adequately accounting for the total value of your possessions covered by a policy, is a potentially serious problem in Cayman, where most property policies have an “average clause” stipulating that policyholders are responsible for the uninsured portion of their possessions.
For example, if someone takes out a policy to cover $10,000 worth of possessions, but in actuality the possessions are worth $20,000, then the policy will only cover 50 per cent of any damages, with the policyholder responsible for the other 50 per cent. So, if flooding causes $5,000 worth of damages, the policy will only cover $2,500.
The price of the insurance policy will vary according to factors such as the construction of the building and location, but is based on the overall value of the possessions to be insured. The price of a policy through Cayman First typically ranges between 1.7 per cent and 2.0 per cent of the value of the possessions, per year, he says. So coverage for $10,000 worth of property would cost $170-$200 per year.
“All-risk coverage,” which protects against losses on items such as jewellery, even if they are taken out of the home while travelling, will typically carry a higher rate, in the range of 3 per cent to 5 per cent of the value per year, Michael says.