Ensure the right protection for your house

7 MinsAug 24, 2020

Harish and Rekha Shenoy pooled all their savings and took a huge home loan to construct their dream house. They also spent a sizeable amount on doing up the interiors and furnishing it. They thought their house was secure enough. But when they went on their annual holiday, their house was broken into and valuables were stolen. Thankfully, the Shenoys had purchased comprehensive home insurance and that compensated their loss to some extent.

You may spend extra in securing your home with additional safety grills, beautifying it with marble floors and buying the latest electronic gadgets and appliances. But what if your home is damaged by an earthquake, flood, inundation or a fire? You will be forced to shell out a considerable sum in repairs or you may even have to reconstruct your house. Or if like the Shenoys your house is burgled, you will have to replace your valuables 

home insurance

We all know the importance of insurance. We insure our lives, our health, our vehicles and even our mobile phones. But when it comes to home insurance, Indians are mostly uninsured. The problem with not getting home insurance is that when a calamity strikes your home, it takes a considerable toll. And since calamities come unannounced, it is always prudent to be prepared.

Need for home insurance

A major part of India is earthquake-prone, especially the northern parts. Floods and inundation have become an annual feature in several parts of the country. Extreme pressure on land has meant cities are now more prone to disastrous flooding as flood plains are built upon and mangroves cut. Cheek-by-jowl living in overcrowded cities also poses a risk of devastating fires.

Given these circumstances, the sensible thing to do is to get home insurance when you purchase a home. Especially, if you live in a flood-prone area or an earthquake-prone zone. After all, for most of us, home is our biggest asset. 

Kinds of home insurance

There are different kinds of home insurance policies that offer the following coverage:

  • Any damage to the structure of the building due to fire or natural calamities - floods, storms and earthquakes
  • Any damage to the contents – personal assets or household articles - inside the house or theft
  • Damage to both structure and content. This is called comprehensive home insurance 

There are even policies that cover temporary living costs in case the owner is displaced. 

A comprehensive home insurance policy covers all the uncertainties that could adversely affect your home. For that, you need to give a detailed account of all the personal assets and belongings in the house when you apply for the comprehensive policy. In case a disaster occurs, this list will be tallied against the destruction of property in the event of a claim.

How comprehensive home insurance works:

1. When you go for comprehensive home insurance, you have to calculate the cost of the structure of your home. This is the total built-up area of your home. This means you have to calculate how much does it cost to rebuild your home. For example, in Mumbai, the approximate cost of constructing a house is about Rs. 3,000 per square foot. So, the insurer may value a 1,500 sq. foot home at approximately Rs. 45 lakhs (1,500*3,000). Remember, your home insurance policy is not based on the market value of your house, which takes into account other factors such as location, amenities, etc. The insurance covers the cost of reconstruction of the damaged parts of the structure.

2. The next step is to calculate the value of the assets in your home. This includes furniture, art, jewellery, clothes, consumer appliances and utensils. The value of all of this is calculated as the market rates after depreciation. Usually, there is a cap for the value of jewellery stored at home, as a component of your home insurance. But you can buy separate cover for jewellery if you wish.

3. Home insurance doesn’t cover cash at home.

4. If you have an independent house, it will make sense to get insurance for assets outside the home like fencing. 

Riders: A rider is an insurance policy provision that adds benefits to or amends the terms of a basic insurance policy. It is essential to look out for riders to go along with your comprehensive home insurance. For example, your home and its contents may be insured against fire and flood damage but not against burglary. You can cover this risk by buying a burglary cover at a small extra cost. Other riders include charges towards staying in alternative accommodation while your house is being repaired or rebuilt.

[Also Read: Tips to Remember While Opting for Home Insurance]

Should you buy home insurance if you live in a flat?

Whether you live in a flat or an independent house, the extent of coverage is the same. The comprehensive home insurance will cover the cost of construction in case of damage and contents in case of damage or theft. 

If you live in a flat, your housing society can also buy insurance that will cover damage to the structure, as well as common areas such a lobby, compound, playground, etc. These would usually not be covered by the individual flat owner’s insurance. 

Another option is if your housing society has purchased insurance for the structure of the building, you could choose to buy insurance only for the articles and content of your home. This will help save cost. 

Can your insurance be denied?  

It may be denied if you carry out commercial activity inside your house or if you make structural changes to the house and not inform the insurance company. Keep these in mind before making a claim.  

As always while buying insurance, read all terms and conditions carefully. 

Axis Bank, in collaboration with Tata AIG, offers Home Insurance Polic that provides you with a comprehensive protection package to secure your home. This policy protects your home from damages due to perils like fire, lightning, explosion/implosion, aircraft damage, riot, strike and malicious damage and many more.
