Most of everything in the world today needs protection. Cell phones have tempered glasses, computers have screen protectors, life and death have insurance policies respectively, and yes, even real estate does too. We protect them because we value them.
What is Real Estate?This is simply the property or properties that consist of land and building/s. Examples of which are house and lots, apartment buildings and condominiums, to name a few.
A more concrete definition of real estate as defined by Business Dictionary : "Land and anything fixed, immovable, or permanently attached to it such as appurtenances, buildings, fences, fixtures, improvements, roads, shrubs and trees (but not growing crops), sewers, structures, utility systems, and walls. Title to real estate normally includes title to air rights, mineral rights, and surface rights which can be bought, leased, sold, or transferred together or separately. Also called real property or realty."
As the years go by, more and more realty projects rise across the Philippines, and while the business of real property grows continuously around the country, more and more people are encouraged to acquire properties while they can. This is also deemed as a very good investment.
Once property is acquired, the first basic need to secure the asset is to insure it. This is necessary to protect the investment. Thus, the existence of insurance companies that provides real estate owners with insurance policies for properties or real estate.
What is Insurance?
"Insurance touches all our lives in a multitude of ways. It is an essential element in our present day life, securing our standards of living and the stability of our families, as well as our property rights. Everyone in this country feels the protecting arm in some form of insurance and most of us are affected by the many forms of its protection."
-Insurance Commission of the Philippines-
With that to consider, insurance is a form of protective management for possible risks in cases of financial losses, damage, illness and death. Premiums are set with an agreed period or method of payment with the assurance of full compensation covered or as indicated in the policy. Let's take a look at the policy coverage and what may be included when insuring your home or property.
In the Philippines, most especially since we are prone to natural disasters, it is important that one's assets are subscribed to a specific insurance company that protects the interests of the real estate. Year after year after year, we are plagued by typhoons, floods and damage to properties caused by fire. Plus some isolated cases like earthquakes and volcanic eruptions. All these may be included in the policy and the policy may even consider property losses caused by terrorism and malicious damages.
It is indeed a way of safe-keeping to have our property tied to an insurance company. But, we have important things to note when signing up for that insurance policy. Our responsibility as property owner and real estate policy holder does not end with our signature on a piece of paper. Our main goal is to ensure our material assets are secured, so we have to make sure that everything stipulated on the contract of the insurance entered into for the property is clear and reviewed with our financial advisers from time to time. We have to be smarter than the fine print.
Policy holders for property insurance need to know that as much as an insurer promises to protect your landholdings, their contract is also designed to protect the interest of their business as well.
In a report on ANC's On The Money, back in August 2014, as published on the ABS-CBN website, titled: "The costliest home insurance mistake you can make...", they showcased the story of Aisha who lost her property in a fire incident, recounting how it made matters worse for them, despite of their home insurance policy, just because they never took the time to read on the terms and conditions, most especially the EXCLUSIONS.
ANC'sfinancial adviser, Salve Duplito, noted that the most expensive mistake one can make when purchasing insurance for property, is not reading and comprehending these exclusions.
The Philippines has become fast-paced as time went by, and reading through a long list of hard-to-understand stipulations in a policy contract, definitely is tiring even for Juan Tamad.
So, Salve makes a stellar point when she said, "Contracts are boring. They are written in fine print and in legalese, but here's a thought: How difficult would it be to change the slant of legal contracts to protect the consumer, rather than the corporation? All it takes is better font size and easy to understand English."
From the same article, Carl Dy, a property sales coach, had noted some major information to never forget to consider. The first one would be the amount of the insurance policy, second, the exclusions of course, third, the inclusions in the protection plan, e.g. natural disasters like flooding, storms catastrophes, earthquake destructions and the like, and fourth, if depreciation is also part of the coverage.
Why are these important? Because our mind should always be set toward what value we get with the money we invest to secure our real property. We work hard to earn our money, which provide us with material possessions. It is not materialistic to want to protect our wealth, it is just necessary.
Another important reason why we should consider all those factors before labelling our signature on a policy contract, is to weigh between the coverage it provides for our real estate property, or if rebuilding property would be more cost-effective.
On considering depreciation in the coverage, the president of MoneyDoctors Inc., Augustus Ferrerria, shared, "Most insurance companies deduct depreciation from claims pay-out, unless you get a cover based on replacement value rather than sound value."
Some additional advise from the experts are to also consider what other valuable contents were included when the damage occurred. For example, if your house was burned down by the fire, you should have a list of your valued items like jewellery, appliances, expensive equipment, art and antique pieces, etc. It will also be greatly helpful to you if you have actual photos of these.
What we are trying point out here is that, in both cases, it is your money, at the end of the day, that will be utilized for both the acquisition of a real estate and getting insurance coverage for your property. When it is your money at stake, it is paramount to take every possible precaution in consideration.
Because, the fact of the matter is, according to them, if the damage was not determined as full, only a portion of the total expected pay-out will be in effect. Ferrerria added, "Engineers would tell you this usable part is often the foundation of the house. Specify that if a fire occurs, the foundation should not be included in the calculation of the net cash benefit due to you."
Insurance for Real Estate can be a lot of work. If you think about this, however, insurance means protection, so this is not really about whether the contract is written in very fine font, or that the length of the stipulations are a hassle, plus the difficult terminologies used. You can maybe find time to sit it down with an expert and make sure everything is explained and reached the point of your understanding before signing. Because, for all the things we care about, we make sure to make time.
Sources:
https://en.m.wikipedia.org/wiki/Real_estate
https://en.m.wikipedia.org/wiki/Insurance
https://www.aig.com.ph/business/product-categories/property
https://www.mapfre.com.ph/insurance-ph/personal/home-insurance/
https://news.abs-cbn.com/business/08/23/14/costliest-home-insurance-mistake-you-can-make