Home Insurance – Protect your home today:
The frequency of natural disasters is a cause for all of our concern. The damage it brings with it makes a big hole in the pockets of those who are affected. But, with a little care, you can avoid this financial issue. Seeing as your house is one of your biggest assets, it makes logic to insure your house and its stuffing..
What is Home insurance?
There are mainly two types of home insurance policies:
- Basic fire insurance policy: Fire insurance policy covers your house against fire and other allied perils including lightening, storm, flood and riot. However, some insurers may ask you to pay an extra premium in order to cover disasters such as earthquake and landslides. You can also insure your house and contents against terrorism by buying an add-on cover.
- Comprehensive policy or Householder’s package policy (HPP). HPP on the other hand packs in more covers. The basic cover divided into two: one covers the structure of the building against fire and other related hazards and the second covers the contents of the house. Tenants can just opt for cover for just the contents. A HPP also offers optional covers that insure contents of your house against robbery, damage, mechanical or electrical breakdown.
How do you choose the sum insured?
The value of your house has three components: land, building and locality costs. Insurance will cover only the building cost. For example, if the market value of your house is Rs 1 crore, of which the building cost is Rs 30 lakh, your policy will insure only Rs 30 lakh. But, what happens when the entire house is brought down, like it happened recently in Uttarakhand where rows of houses got flushed away? If the land is yours, you should be able to rebuild the house. But if you have an apartment, you alone can’t reinstate the house. Therefore it’s recommended for housing societies to buy insurance for entire premises.
There are two ways of buying home insurance: one is on the market value basis or depreciated cost basis and the other on the reinstatement basis. Don’t confuse market value for resale value. When you re-sell your house, you get the value of land and the locality as well. In insurance, market value is similar to the value of your house after factoring in depreciation. Insurer will depreciate the market value by 2% per annum going up to 100% in 50 years. Reinstatement on the other hand is the value of reconstructing the house. The insurer in this case will not deduct depreciation. Go for reinstatement cover even in case of the contents of the house. But keep in mind that the insurer will settle the claim only after the house is reconstructed. But some insurers may make part of the payments to help you reconstruct the house.
How much does it cost?
Insuring the house and its contents is not very expensive. For example, for a sum insured of R30 lakh for the building and R5 lakh for the contents a pure fire insurance cover that covers against fire and other related hazards along with a terrorism cover would come to about R2,000 for a year. Pack in burglary and theft cover for a sum insured of Rs 5 lakh and the premium will be Rs 3,155. Add additional cover for breakdown domestic appliances for a sum insured of Rs 4 lakh, the policy will come for about Rs 5,600 for a year. If you own a house you should buy home in insurance as soon as possible. If you are a tenant you could insure just the contents. This is just an example. For complete detail better to consult good Insurance companies.
What is insurance claiming process?
It’s important to cover your house, but do not ignore the claims process. At the time of a claim the insurer will have the damaged goods inspected thoroughly. Therefore you will need to ensure that you have made the right declaration and you have sufficient proof. Keep in your mind that insurer can refuse claim in case of subsidence building or poorly maintained building or unauthorized construction etc.
(Source & Image: Bharti AXA General Insurance, ICICI Lombard General Insurance, Net)