How to choose a home insurance policy for your house

By opting for the right home insurance product, owners can protect their abode and belongings against natural, as well as man-made losses. We explain how to go about choosing the right policy for your house

In India, most home owners do not bother to insure their homes, even though it is often the biggest asset that one can own. Neeraj Prakash, managing director of Shriram General Insurance Co Ltd, attributes the low demand for home insurance, to ignorance, saying that Indians are not even aware of the risk associated with their lifetime investment.

“Even the people who are aware that a home can be insured, are not doing so, as they consider it a waste of money. They feel that any threat to their house is rare and may happen once in 10 years. In many places, people may have not experienced any threat to their home in their lifetime. This ignorance can expose them to high risk, which can be avoided by paying a small annual premium,” Prakash explains.

 

What is home insurance?

Even though India witnesses natural calamities each year, home insurance remains a low priority.

“Currently, unlike a car insurance, home insurance is not mandatory. However, banks are making it mandatory for a borrower to obtain home insurance, while opting for a home loan. In home insurance, the cover is provided for the structure and contents. There needs to be more awareness about such products, as a lot of people are not even aware of home insurance,” points out Surabhi Arora, senior associate director – research, Colliers International.

See also: What is title insurance and why do housing societies need it?

“A home insurance is a safety net that provides cover, in case of damage. It protects the house from unwanted, unforeseen causes that can damage it, such as fire, smoke damage, floods, earthquakes, lightning strikes, storms of all kinds, explosions, riots or civil commotion, burglary, break-ins, vandalism, etc.,” adds Navin Chandani, chief business development officer, BankBazaar.com.

People generally believe that home insurance is expensive and the process of settlement of claims, is complicated. Prakash, however, maintains that the scenario has now changed, with the entry of many insurers and the regulatory authority keeping a strict vigil on the operations of these companies.

“The premium payable towards insuring a home is around Rs 50 for coverage of one lakh rupees and when the policy is taken for a long term, then, the insurance premium can even come down to Rs 25 per Rs one lakh coverage,” explains Prakash.

 

What does a home insurance cover?

In home insurance, the coverage is generally limited to the construction cost and contents of the apartment. “For the structure, the insurance cover is based on the area of the apartment and the approximate construction cost. Thus, one should avoid taking excessive insurance, as one will not get the claim for more than the construction cost of the company. Check the claim history and track record of the company, before buying the home insurance. Check the inclusions and exclusions of the policies,” Arora advises.

Not all types of damages are covered by all home insurance policies. Different types of home insurance policies provide cover for different types of damage. Hence, it is essential to do one’s homework, before selecting a home insurance. Check the list of risks and natural calamities that are included in the policy. “Read the policy carefully and understand the terms and conditions. Make note of the exclusions. Get all doubts cleared, before buying the policy. Check the financial ratings of your home insurer. An ‘A’ by CRISIL, is a good indicator of strength,” says Chandani.

 

Claiming home insurance

Ensure that you have all information, like policy number, name, address and ID proof ready, if required. “When filing a claim, mention the type (theft/fire/water damage, etc.) and the description of loss or damage to the personal belongings and home. Call the concerned authorities, in case of fire or pipeline burst. If possible, take photos of the damaged area and also keep the receipts from services used or purchases made, because of the damage/loss. The insurance company will deploy a surveyor and have the damaged goods inspected thoroughly. The claim is settled, after the losses are assessed,” Chandani elaborates.

It is advisable to do an online search and compare different policies and their scope, before buying. Check everything, including the extent of cover, the exclusions and increase in annual premium.

 

Points to consider, while opting for home insurance

  • The policy should only be taken for an adequate sum, because under home insurance the claim payment is limited to the cost of construction.
  • Always take a home insurance policy for the long term, so that the premium can be minimised.
  • Opt for add-on covers like earthquake/terrorism.
  • In order to hedge the inflationary impact on construction price, always opt for the escalation method of insurance.
  • The inclusions and exclusions are treated differently by each insurance provider. Therefore, one must carefully go through the policy document, before selecting any insurance.

 

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