What is Home Insurance
Buying a home insurance is not very common in India as of now; though the trend is catching up but as per some estimates less than 1% homes in India are insured. Though we often realize the importance of getting auto insurance (it is mandatory), life insurance and travel insurance – we often miss out on home insurance. So what is home insurance?
What is Home Insurance?
Home insurance policies offer cover losses occurred due to both natural and manmade disasters. The insurance policy is active for a specific period and the insured pays the premiums during this period.
Home insurance cover and premium are based on the area of the house, approximate rate of construction per square feet and the location of the house. Two houses of same size can have different sum assured.
Example: House A is 500 square feet and the cost of construction per square feet is Rs. 700, so the sum assured for the structure would be Rs.350,000 while House B is also 500 square feet but the cost of construction is Rs. 1000 so the sum assured would be Rs. 500,000.
The house is insured for the value that it would take to reconstruct the house and not for the market value of the house. The contents on the other hand are insured for the market value minus the depreciation. You must keep a few important factors in mind when you are choosing a home insurance.
Factor to consider when choosing a home insurance
Now that we saw what is home insurance, lets look at some of the factors to consider while choosing a home insurance
Insurance companies allow you to cover either the contents of the house or the structure or both. You should make this decision carefully as this affects the premium and as well as the safety of your house.
If you are living in a rented apartment then it makes sense for you to cover the contents of the house only and not the structure. Also understand the rules about the contents that can be covered. Bajaj Allianz has a stipulation that the domestic, electrical and mechanical appliances covered should be less than ten years old.
2. Cost of Construction
This is an important factor that decides the sum assured and you should pay special attention to this aspect when you buy a policy. The companies may have a standard rate of construction for each locality; however it may vary if instead of using standard material a person has chosen to use higher quality material for his/her house.
A person may choose to use special wooden flooring for his house rather than normal chips which will automatically increase the cost of construction per square feet. When choosing a policy keep this in mind! ICICI Lombard offers the highest flexibility when it comes to the construction rate per square feet.
3. Inclusions and Exclusions
While the inclusions are pretty standard across companies the list of exclusions varies. You should concentrate also on what is not covered. The calamities covered included are:
- Riot, strike and malicious damage
- Explosion and implosions
- Storm, cyclone, tempest, tornado, hurricane, flood and inundation
- Aircraft damage
- Damage due to impact by vehicles
- Missile testing operations
- Subsidence, landslides and rockslides
- Leakage from automatic sprinkler installations
- Bursting and/or overflowing of water tanks, apparatus and pipes
Generally willful destruction, loss due to wear and tear, jewelry, cash, bullion, paintings and other works of art (unless specifically mentioned) are not covered. Royal Sundaram specifically mentions that they would not cover loss or damage that occurs due to defects in design, material or workmanship while TATA AIG has a clause that it will not cover property in the basement.
4. Additional Covers
Always explore the option of additional covers offered by the company but do not get enticed by unnecessary frills. Loss due to acts of terrorism is often offered as an additional cover.
Terrorism is a real threat in today’s world but some parts are more prone to it so consider this before you take an additional rider. ICICI Lombard also offers to cover the rent in case you are forced to shift to another location due to damage to your house.
5. Claims Process
Understand the claims process well before you buy the policy and make a note of all important clauses like for claiming damage to appliances the original invoice is required when filing a claim so you must insure that you have these before you insure a household item.
Example: Mr. Mehta was posted out of the country for an offshore assignment for a period of three months. He had already insured his house so he was at peace. On coming back he was shocked to see that his house had been burgled. Worse was yet to come when his company refused to process his claim;
The policy had a clause that if the house was unoccupied for more than 30 days without prior intimation to the company the company was not liable to pay for the losses. So he was lefty high and dry just because he failed to comply with one small formality; a phone call would have saved him all the hassle.
Most companies have a 24*7 helpline and they appoint a surveyor within 48 hours. They will however the required documents like original invoices, copy of FIR or report from fire department whichever is relevant and the report by the surveyor to process your claim.
Hopefully you got some insight as to what is home insurance. With the above factors in mind you can easily buy the right policy which will keep your prized asset safe and give you peace of mind. Getting the required information today is just a click away so research well and makes a well informed choice.
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