- Date : 02/04/2016
- Read: 5 mins
Home insurance is a fairly new concept in India when compared to other types of insurance like life and health. We’ve thus created an easy to understand guide to Home insurance for your ready reference.
In a June 2015 survey of nearly 1,200 people from metro cities in India like Delhi, Mumbai, Bangalore, Hyderabad, Chennai, Kolkata and others, revealed a shocking, and some might say even terrifying, statistic – only 30% of homeowners in India have insurance for either their house or its contents. And while out of all the respondents in the survey, 75% believe that some form of home insurance is essential, the perceived difficulty in understanding home insurance clauses and products kept them from safeguarding their home. This clearly indicates how a lack of knowledge about this subject is causing people to play dice with their future and the future of their home.
What exactly is home insurance?
Whenever your property is damaged or lost, such as in a fire, your home insurance policy will cover the cost of the damage, thus offering sufficient reparation. This comes with a few caveats, of course. Not all types of damages are covered and different home insurance policies cover different types of damage. For example, a premium policy might cover earthquakes, floods and more in addition to fire.
Naturally, it is an expensive safety net. Monthly payments may be affordable, but it's important to do your research and pick the best policy and provider for your property. For instance, someone living inland needn't worry about typhoons. Similarly, people living in earthquake-prone areas should ideally have a premium home insurance plan that will provide them a cover if an earthquake strikes.
Some policies will cover personal property damage as well, meaning the personal goods damaged in the event will be compensated for with monetary payment. Insurance for property damage is incredibly crucial for people who’re living in rented houses; you may think that because you don’t own the house, there’s no need for you to insure it, but the contents of your home also need to be protected in case of a disaster.
There are more conditions that your policy may include, such as liability insurance (when suits are filed against damage in the premises of your house).
Related: How to save money on your home loan
Should you purchase home insurance?
The answer is a resounding yes.
Insurance companies claim that a general lack of awareness pervades the country, obstructing the growth of home insurance sales. The average home-owner ignores the risk of natural calamities and man-made damage, which is a very real possibility.
While the premium you pay for your home insurance plan depends on a multitude of factors (including the age of the property, its square footage, the cost of reconstruction, furniture, electrical appliances, valuables, works of art etc.), there are several ways you can reduce it, thus making home insurance affordable.
Firstly, before purchasing a policy, a thorough comparison between different policies provided by different insurers is imperative to help you decide which policy will get you the best deal.
Secondly, a lot of insurance providers give discounts on premiums based on the installation of smoke detectors, burglar alarms etc. Not only will these keep your home safer, but also lower premiums.
Finally, choose a policy that covers you for disasters that your home is actually at risk of; if you live in a fairly dry region of Rajasthan, the risk of flooding is rather obscure and only adds to your premiums without providing any actual benefit.
Those who are hesitant to purchase home insurance due to high premiums can rest assured that with the right plan, it can be extremely affordable.
Here are some of the things you need to know before making a purchase:
Types of home insurance
There are two options for home owners to pick from: a basic building policy which covers calamities likes fires, storms and related occurrences, and a wider policy which includes damage arising from human involvement. Some policies may ask for an additional fee for protection against additional calamities.
As we said earlier, comprehensive insurances can also cover loss and damage to household items and goods, though this comes with stipulations. Read the exclusions carefully before you zero down on the policy.
Consult an expert before you make your choice.
Making the claims
It can't be said that filing claims is hassle-free. You'll have to provide evidence of damage and your home will be inspected before the insurer approves the funds. Your policy may cover household goods but the terms will have to be read carefully as, in certain instances, the goods are excluded from the claims. The extent of damage can sometimes exceed the insurance coverage, so you'll have to be prepared for the worst-case scenario.
Don't be swayed by salesmanship
Speak to multiple agents and obtain as many quotes as you can so you can compare like-to-like. Examine the stipulations of each of the plans and determine which one best suits your home.
Home insurance can be tricky business if you're not very knowledgeable about the matter. Choosing the wrong policy might mean a huge financial loss while the right will one will only take a small portion out of your income every year and will offer you a nice cushion, should anything happen. Your home is valuable not only financially, but sentimentally too, so it makes sense to do everything you can to protect it.