If you have recently purchased a house or own a residential property, then you would have come across insurance agents trying to convince you to sign up for a – home insurance plan. A home insurance policy offers you the much-needed peace of mind. You can relax knowing that your most precious asset – your dream home – is well protected, in times of crisis.
While many homeowners have heard of home insurance policies or even own one – very few people understand what the policy does, its benefits, what’s covered and not covered, where to shop for it, and more. Worry not, here in this guide, we offer you all that you need to know about a home insurance plan and tips on how to select the best home insurance policy at the best prices.
What is home insurance, and how does it work?
As the name implies, home insurance is an insurance policy that is designed to offer coverage for private residential homes and their contents. Just like all insurance plans, the policy owner pays regular premiums to the insurer. The insurer provides financial coverage for the house – the structure as well as the contents inside – during an emergency like a natural or man-made disaster. The premium of home insurance plans is determined by the size of the property, the location, replacement cost, coverage, contents and more.
Additional Reading: Importance Of Having A Home Insurance Policy in India
7 Reasons to Buy a Home Insurance Policy in India
Let's begin by asking you a question – can you identify the most expensive material asset that you own? The answer very often is – property, and in most cases, your residential home. You have invested your hard-earned money and sweat in constructing your dream home – your haven of peace. But, have you taken the right measures to protect it from potential threats like fire, natural calamities, theft, riots, etc.?
Here are the top five reasons why home insurance is a must for all homeowners:
Protect yourself from Financial Losses due to Natural Calamities
Remember the recent natural calamities like the devastating Chennai floods of 2015, the Kerala flood, North East floods, Karnataka floods and more? Every year, India faces property loss on an average of $9.8 billion to natural calamities. While it's not possible to put an end to natural disasters, what you can do is stay protected. A home insurance plan can help you protect your property from natural disasters like floods, earthquakes, cyclones, and more.
Safeguard your Home from Man-made Damages
Besides natural disasters, your home also faces potential man-made damages like burglary, thefts, and acts of riots, terrorism, fire and more. You can protect your home from these damages by opting for riders (add-ons) in your home insurance plan.
Protect your Valuables
Besides compensating for the structural damage to your home, a home insurance plan also protects your assets like – expensive home appliances like television, refrigerator, air-conditioners, washing machines, furniture and more.
Temporary Relocation Allowance
In case of total damage to your home due to a natural disaster, you may have to relocate temporarily to another property, while your home is being fixed. Most home insurers offer temporary relocation allowance which covers the rent you pay for the temporary accommodation, while your home is being repaired.
One of the biggest perks of home insurance plans is that they are available for the long-term. Instead, of renewing it every year, you can purchase it for a longer duration like five or ten years.
Consider this scenario – a visitor to your home is injured while they’re on your property. A home insurance plan offers liability coverage to the injured. The liability coverage also extends when damages or injuries occur to people or property adjacent to your home. For instance, it gives you financial protection when the limb of a tree in your home falls on a car parked near your compound wall.
Increases Home Loan Eligibility
While applying for home loans, most lenders insist you hold a valid insurance policy for your home. By applying for a home insurance plan, you can increase the chances of securing a home loan.
Additional Reading: What Is an Insurance?
Types of Home Insurance Policies in India
General insurance companies in India offer an array of home insurance plans to suit the specific needs of different homeowners. Here, you can find a list of the common types of home insurance policies available in the country and the benefits of each plan.
|S.No.||Home Insurance Policy Type||What does it cover?|
|1||Standard Fire and Special Perils Policy||Basic home insurance policy. It offers coverage for your home against fire accidents, natural calamities, man-made disasters, etc.|
|2||Home Structure Insurance||Also known as building insurance. It protects the structure of the home, including permanent fixtures like bathroom and kitchen fittings, ceilings, flooring, etc.|
|3||Public Liability Coverage||It offers third-party liability coverage to guests who meet with an accident or other physical damages in your home.|
|4||Thefts and Burglary Insurance||It provides compensation for the valuables inside a home, in case of a robbery or burglary.|
|5||Contents Insurance||It provides protection for the contents of a house, including home appliances, jewellery, home furnishings, etc.|
|6||Tenants Insurance||It's exclusively for tenants. It provides coverage only for the contents inside the house and not for the building structure.|
|7||Landlord’s Insurance||It’s specifically designed for landlords who rent out their property to tenants. It includes coverage for third-party liability, loss of rent and the overall structure of the building but not for the contents inside it.|
What’s covered under a Home Insurance Plan?
The actual inclusions and exclusions of a home insurance plan depend on the specific policy type and the insurer. Make sure to go through the policy brochure carefully, to understand the various inclusions and exclusions.
Inclusions: Generally, most basic home insurance plans offer coverage for the following:
Damages due to a fire accident
Structural losses to the building due to lightning, hurricanes, floods, cyclones, tsunamis, earthquakes, storms and other natural calamities
Damage to the property due to riots, strikes, acts of terrorism and other man-made disasters
Exclusions: Generally, all home insurance plans do not offer coverage for the following:
Damages due to wear and tear
Damages due to nuclear attacks, foreign invasions, war
Damages due to improper use of a home appliance
Damages to items like heirloom jewellery, antiques that have not been declared in the policy proposal form
Theft of cash in a home burglary
Minor damages like cracks on walls, scraping of wall paint, termite and other pest infestations
Factors to keep in mind while purchasing Home Insurance
Choose the Right Sum Assured
Make sure to choose the sum assured wisely – after evaluating the market value of your property and the contents of your home. While opting for a lower sum assured helps you bring down the premium amount, it doesn’t cover your damages completely, in case of an accident or mishap.
Read the Policy Document Carefully
Make sure to read the policy document carefully to understand the inclusions and exclusions, so that you can avoid discrepancies later on.
Finally, Compare and Buy
Spend some time comparing different home insurance policies from various insurance providers.
Additional Reading: Different Types of Insurance Policies
Always do your research on the different home insurance plans available and their features. Compare premium costs, benefits and choose the right policy that best fits your needs.