Myths about home insurance

Top 6 myths about home insurance

According to the same finding presented at the myths about car insurance, the indecision of the people who want to purchase a product or service raises a warning on the behavior of the consumer these days. The causes of indecision are multiple, from too much information without quality content to the total lack of it, all contributes to the formation of this negative phenomenon among the consumer public.

This situation is encountered also in the case of insurance products and services. People decided on the purchase of an insurance product, house insurance for example, have taken note of the characteristic information regarding the products wanted, in most of the cases. Those who are undecided are searching for information about insurances on the official sources (the website of a company, articles and financial analysis, etc...) or on some unconventional sources, especially events and situations that happened to close persons. We call these unofficial sources, myths, because their basis cannot be found on concrete and real evidence.

In the following we will expose and analyze the most important myths that create uncertainty regarding the consumer public of house insurances:


1. Optional home insurance: Who needs them?

When assisting to a presentation of a home insurance product the mind of a person is full of many questions: “Who needs a home insurance? All homes are burnt or flooded every day? The techniques of building houses ensure the fact that they will not have problems for a minimum period of 10 years.” But the answer to all these questions is provided by the statistics: Romania is located in an area exposed to the risk of earthquake; the floods from 2010 affected 3,600 homes in 37 counties; in 2010 in Romania there were in average 15 fires in homes every day; at intervals of less than an hour there is a robbery in homes, etc...

For each person, the home is like a sanctuary of the family and we all tend to protect it against unpredictable losses such as natural disasters or domestic incidents. Protecting the family by insuring the building can be extended to the household goods that people have acquired over the years and have invested time and money. Thus, the savings we can have in a bank for “rainy days” are similar to buying a home insurance with the addition of extra benefits - you save some money for your home for the time you will need it. For this reason, it is indicated that some of the economies of every person must be directed towards insuring the home - the situation can be considered as an investment for “your investment”.


2. Offers from the home insurers have a high cost

,, The financial consultant will always think about his/her own commission. All home insurances are the same – are including the same services and have the same mission. So why waste time informing us and looking after offers, when what we get in response is the same story just with a different formulation and different promotion techniques?" What can be said regarding this myth is that the method of purchase by comparison is the most efficient way.

The insurance environment is surrounded by a high competition, where insurance companies and insurance brokerage companies are addressing to an audience which is often common. In this situation, the main goal for each competitor is to come into prominence by capturing the attention of the customer through services and products that are unique and exclusive. Along with the global economic crisis, it is observed that people became more reticent to the investment products, by increasing the degree of precaution and financial responsibility. Considering this phenomenon, the best way a person can purchase a home insurance is to be informed by multiple sources, analyzing the offers of the insurers. Thus, the person can protect its home by purchasing insurance in order to fold both on its needs (considering the potential risks from the location of the building) and its own pocket. There are numerous studies that say that the consumer saves in average of up to 70% of financial cost, if analyzes and compares the information in the business market.


3. Home insurances do not includ entirely what we need

,, House insurances include all the risks you want to protect your home from? May the home insurance policy that provides protection for natural disasters extend its coverage to situations of robbery? Or you have to buy two types of insurance?” These situations find their immediate solution by prospecting the offers of the insurance companies and insurance broker companies. For example, if a person wishes to provide education to his/her child then he/she will search for the best universities in order to satisfy both educational and financial desires. The same rule applies when choosing a home insurance product - to find the best home insurance that combines all the aspects a person wants it is necessary to analyze the offers presented by a financial advisor of an insurance broker company (products and services presented are different and the financial consultant makes a careful and professional selection to present the best solution to the client). Companies have turned their attention to customer needs and have implemented a number of products which are able to successfully meet the most diverse customer requirements, covering fire, lightning, explosion, crash of the aircraft, vehicle collision, flood, natural disasters, falling objects, vandalism, malicious actions of groups, theft, burglary, damage to third parties, accidental damage of gas, water or central heating and air conditioning installations, accidental breakage of breakable assets and also accidental damage of buildings under construction.


4. Home insurance represents a fake

Persons which have an opinion about home insurance in terms of such a myth can be found in the phenomenon of disinformation. Here are some arguments to combat this assertion. Although a person pays the premiums of a home insurance policy for a long time and did not notice capitalization of the investment, this does not mean that the amount of money saved is a waste. In fact, the happiest case is that the person who insured its home does not end up in one of the events insured (flood, fire, burglary, etc...) and benefits from the amount insured. It is true that people tend to become suspicious when a bureaucratic phenomenon occurs, but if it prevents from taking a rational decision about home insurance, then this distrust turns into a form of negative skepticism. A person must observe which side he/she belongs to, because the worst combination is when an unfortunate event happens, with the result of a total damage to the house and the persons remain "homeless" just because they did not consider an economical priority the allocation of a percentage of their income to protect their home and eventually their family safety.


5. The face amount of a home insurance has to be equal with the amount of buying the home

A mistake often repeated by those who want to insure their home is determining the face amount according to the price of purchasing the house, causing the insurance premiums to be higher than necessary. For this reason it is appropriate to note that the price for purchasing a property includes the price of the land for the building, and in the case of risks such as fires, etc..., protecting the land it is not necessary. Therefore, the optimum solution is to purchase an insurance policy that will include coverage for the reconstruction of the house, in case of a total loss.


6. I already have a mandatory home insurance policy; the optional one is just an additional cost

,, I have purchased a mandatory home insurance (PAD) which gives me total certainty on my property " is a way of thinking when a person has an insurance policy -  PAD. But it often happens that the persons are purchasing home insurance only for its mandatory character, without taking note of the cases covered by that policy.
Mandatory home insurance covers damages in three major cases: earthquakes, floods ( as natural disasters) and landslides. Their character is primary, with minimal consistency in the face amounts provided. Thus, the person who owns a mandatory house insurance will be compensated in case of only the three events. Instead, a person who provided his/her building with a compulsory insurance (PAD) has the option to purchase an additional optional insurance to cover the entire value of the building and property for multiple risks. Also, for those who have not protected their home, but intend to acquire a home insurance policy, the best solution is the optional one. This includes both natural disasters (earthquake, flood, silt, land slide, hail, weight of snow) and all other situations that may endanger the safety of home: fire, explosion, being hit by cars, lightning, burglary,  acts of vandalism, damage caused by the installation of water , damage to third parties, etc, ... In conclusion, the daily reality shows that burglary or fire are dangers more  pronounced in Romania, which indicates that PAD is not an insurance policy that provides a total safety of the home and this requires a completion by the optional home insurance policy.

These top 6 myths about home insurances represent on a large scale events which are influencing in a negative way the way that people perceive the optional home insurances. The company Kunden Broker de Asigurare SRL promotes through the arguments presented above accurate information about home insurance products. When a person has knowledge of the product he/she wants to buy then the phenomenon of uncertainty will remain a myth in the insurance environment.