In the wake of recent earthquake, discussions about home insurance have taken a sudden centre stage.
There has been a much required awareness on the catastrophic consequences of not having a home insurance policy.
Let us take a quick look at the various nuances of a home insurance plan thus helping you make an informed buying decision.
Why Home Insurance is Critical?
Home insurance is the only safety net you have, for your most precious and expensive investment.
There is no dearth of dangers that loom above your roof and the importance of having a home insurance can’t be undermined.
Protection Against Damages Caused By Natural and Man-made disaster:
A good home insurance ensures that you are financially equipped to rebuild your home that takes the brunt in case of an ‘Act of God’ like earthquake or flood, and against damages caused by human beings like fire, theft, terror act or vandalism. Both the structure of house and its content under the protection cover of a home insurance.
Provides Expenses For Temporary Living:
A middle class person usually owns one house and God forbid, if that house is damaged then you not only pay a huge amount for its repair but also incur expense to keep your family somewhere else during interim period which is not cheap either.
Home insurance covers you in this scenario as well. It pays for expenses incurred while you stay in a hotel or a temporary apartment.
Covers Contents of the House:
House is not just four walls; it is much more than that. There are innumerable expensive things that we keep inside a house like jewellery, furniture, electrical appliances, etc.
It takes years of budgeting to accumulate these and seeing them getting destroyed in minutes can be heart-breaking. Home insurance takes care of this aspect too.
Guarantee For Home Loan:
For home loans, banks usually have a pre-condition that the house that you plan to buy with the applied loan should be insured. Thus, home insurance is compulsory to get a home loan.
I think enough cogent arguments are given in favour of criticality of buying a good insurance plan for your home which covers both your house and its precious assets.
Understand the Basics of Home Insurance
If you ask me home insurance is simplest and the most effective insurance product. It primarily covers two things: the structure of your house and its assets (known as content in insurance lingua).
So you can either choose to insure any one of these or get a comprehensive plan that covers both.
To add to this, people living in seismic zones can opt for special earthquake cover to build a stronger protection. Similarly, there is a terrorism add-on cover too.
Building Insurance covers-
• Fire, Lightening, explosion of gas in domestic appliances
• Bursting and overflowing of water tanks, apparatus or pipes
• Riot, Strike, Malicious or Terrorist Act
• Flood, inundation, storm, typhoon, hurricane, tornado or cyclone
• Damage due to earthquake, subsidence and landslide (including rock slide)
• Damage caused by Aircraft & Impact damage
• Third party liability and personal accident
Content Insurance covers-
• Theft and vandalism
• Valuables such as jewellery, cameras and watches against all risks
• Cover against all kinds of accidental breakage of plate glass fixed in doors and window frames
• Loss/damage to domestic appliances due to electrical and mechanical breakdown
• Willful destruction of property
• Loss, damage or destruction caused by war, revolution, rebellion or military attack
• General wear and tear and atmospheric conditions etc.
• Damage due to an act of terrorism (unless specifically covered)
• Damage caused due to radioactive contamination or nuclear radiation
Factors Considered For Premium Calculation
You must evaluate the value of your property and assets to reach the right sum assured amount based on which the premium will be calculated. Important factors in this calculation are:
For insurance of structure:
• Property area
• Rate of construction (per square feet)
• Location of the property
• Reconstruction or reinstatement value
For insurance of content/assets:
Contents of your home like electrical appliances, clothes, furniture, jewellery, crockery are valued based on their market value after calculating depreciation.
Some Pointers To Buy the Right Home Insurance Plan
It is quite important that a buyer researches well before buying a home insurance. You must compare policies from various insurers to get the best deal. Make an informed choice.
Choose the Right Amount for Sum Assured
Evaluate the market value of your house and assets before deciding on the sum assured. Don’t settle for anything less just to save some bucks on premium.
Again, opt for add-on coverage like terrorism or earthquake protection, depending on your property’s location. It is better to be safe than sorry!
Understand Policy Details Closely
Read each and every minute detail in detail. Ask questions about inclusions, exclusions, add-ons and coverages before buying the plan. Stay away from any misconceptions and avoid rejection during claim processing.
Maintain Complete Transparency
Don’t hide any information about your house from the insurer. Do mention about the earlier damages and renovations so that the house can be valued appropriately.
Lack of transparency at the time of buying insurance is a leading reason for claim rejection.
Keep Relevant Documents Handy
File and organize all the property related documents like property papers and original bills of valuable assets. You will require these both at the time of buying the insurance and during filing of claim.
Curated from Why Home Insurance Matters