In India, there are several banks and financial institutions which offer a variety of home loans, each having a unique set of features and benefits to address different home financing needs. Also, now a days banks and lending companies require all home loan applicants to have insurance policy for the property under consideration.There’s much more to home insurance beyond the usual queries surrounding premium installments or tenure.
Our home is one of our most valuable assets. Similar to protecting one’s life and health by way of Insurance, It is of utmost importance to protect one’s home and belongings by availing home insurance.
Home insurance is very important part of every homeowner’s life.It works like a protective cover which safeguards not only your house but also your personal belongings from any potential damage which may be caused by any manmade or natural causes.
In India home insurance penetration is fairly low despite of increase in home insurance buyers over the past few years. The main reasons behind such low penetration is primarily lack of awareness about home insurance products and apprehension on associated costs and processes involved with buying home insurance.
Significance of Home Insurance
India is a country with varied climatic changes and over the past few years (Cyclone in Andhra Pradesh, Floods in J&K, Uttarakhand, Chennai, Earthquake in Nepal, Northeast of India) we have witnessed many such event which have caused significant loss to human lives and physical properties.
It has become extremely important to have proper cover for our assets and our home is one of our most valuable assets. Having a home insurance definitely reduces the financial stress in the event of any such mishap.
With a robust home insurance plan, you can protect yourself against most of the Natural disasters or “Acts of God” such as earthquakes, typhoons, cyclones, floods, landslides, etc. Home Insurance also covers Fire, explosion etc. as the main cover.
Despite the best of safety measures and security equipment, manmade threats such as thefts, robberies, terrorism, riots, strikes, etc. are a very real risk. Home insurance policies can be extended to cover such risks also.
Typically home insurance policies cover
1. Structure of home – Home Insurance policy pays to repair or rebuild your home if it is damaged or destroyed by any peril covered under the policy. When purchasing coverage for the home structure one should consider buying enough coverage to rebuild home.
2. Contents / Personal belongings – Your furniture, clothes, household equipment and other personal items are covered if they are destroyed by fire or stolen, hurricane or other insured disasters. Expensive items like jewelry, furs, art, collectibles and silverware can also be covered up to some limit.
In India typically home policies are package policies which have a number of sections offering various covers. A comprehensive home policy can cover fire, natural perils, riots, malicious damages, burglary, damage to household equipment, and even personal accident.Under some home insurance packages, you can also make a claim for personal accident, for payment compensation for partial or permanent disability due to an accident.
Premium & Cost
The premium generally will depend on sum insured of structure and content. Typically sum insured of the structure is based upon multiplying the area of the structure by the cost of construction. Construction cost will, in turn, depend on quality of construction and also locality to an extent.
The value of the contents is ascertained by its current market price Depending on the type of home insurance policy you take, you get coverage for different kind of hazards.
Apart from this premium will also depend on overall coverage under the policy and various limits selected under different sections of the policy such as burglary, all risk, breakdown, personal accident etc. Premium also varies based on the past claims on the risk and location of the risk.
Important aspects while buying Home Insurance
How to choose a Home Insurance? Here are few basic pointers, which can be very useful, if you keep them in view, when planning to buy a Home Insurance –
First, find out what is the performance or reputation of the Insurance Company in terms of service aspects. If the track record of the company is not good, then it is not advisable to take a risk for a buying Home Insurance from such a company – however tempting the offer or premium deal may be. While finalizing the company, it is also important to check its track record with respect to claims settlement. Sometimes, the company may not so popular or established, but if they provide better options and offers – and have a stable background – then, you can do your research and rethink. Also, look for company’s nearby office – for your own convenience.
Another priority is to find – what does the company offer under Home Insurance. Ideal approach is to get a total cover considering various aspects. One should also enquire about the provisions in the insurance policy for coverage of personal belongings like jewelry, clothing, appliances etc., provisions related to claims settlement, documentation etc.
Insure your home for its replacement value, not what you have paid for buying it. Insurance policy generally covers what it costs to rebuild the home, if it’s damaged or destroyed, in a condition prior to loss. The home will likely cost more to rebuild, because of the consistently rising rates of inflation. If you have home on a large area of land, know that the basic Home Insurance policy does not insure the value of land. So, the amount of your policy may be significantly less than what you paid for the home.
Many banks and building societies encourage borrowers to take out Home Insurance that is tied in with their mortgage, but you may find later that you are paying more. So it’s better to carry out your own research – with the help of expert intermediaries, who will guide you well. It is always worth looking for the policy that suits you best and provides the best value.
The article is written by Mr. Rajive Kumaraswamy-MD & CEO of Magma HDI General Insurance.
