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We are sure that you realise that despite installing sophisticated alarm systems and having fire extinguishers, your home is at the risk of being damaged, either due to natural calamities or man-made occurrences. A Home Insurance policy, also sometimes known as a Householders Policy is an insurance which will give your house protection against various risks.
Types of Home Insurance and optional covers:
Home Insurance is basically of two types –
(a) Insurance for the Structure and
(b) Insurance for the Contents.
Some insurance companies differentiate it as damage due to (a) Fire and Allied risks and (b) Burglary and Theft. Irrespective of the categorization, there is little differentiation in the products offered by different insurance companies, and finer details vary, the benefits of which differ from individual to individual.
The structure or the building of your house can be damaged due to various reasons, including but not limited to fire, explosion, aircraft damage, lightning, nuclear or missile testing and most importantly - natural calamities such as earthquakes, tsunami, floods, cyclones etc. Similarly, you can lose the contents inside your house due to fire and allied risks or due to burglary, theft and larceny. These contents can be jewellery, valuables, electronic and electrical appliances and equipments, furniture etc. By taking a home insurance for the structure and contents, you can get the value of Sum Insured in case of damage.
Many insurance companies like Tata AIG and Future Generali offer additional covers such as public liability cover and personal accident cover which can be opted when you purchase a home insurance. Some companies like ICICI Lombard, Tata AIG and Future Generali also give you compensation towards the amount of rent you will have to bear in an alternative accommodation. Terrorism cover is usually an optional cover, but the policy by Reliance has it in-built in the main policy itself. These additional covers come at a cost, and an additional cover opted for means you will have to shell out more premiums.
How is the amount of cover determined?
The Sum Insured of the Structure is usually the reconstruction cost. This is determined by multiplying the area of your house by the prevalent construction cost. The value of land is not considered in this case. Remember that you cannot insure the structure if you are a tenant and do not own the property. In such a case, only the contents can be insured. The Sum Insured for the Contents is based on the market value or replacement cost. Most insurance companies do not ask for submission of documents for this purpose. However, remember that depreciation is deducted from the market value while determining the amount to be insured.
Things to remember while buying a Home Insurance:
- As in the case of any other insurance, it is important to read the fine print and confirm all aspects with the insurer before you sign the dotted line. This becomes more critical in home insurance as each insurer will have different conditions attached to the contents being insured.
- Although some insurers do not ask for documentation, make sure that you have documents in place for the structure and contents you are insuring.
- Policies generally have a sub-limit on the Sum Insured for different categories of contents and this varies from one company to another. For example, the value of jewellery insured cannot exceed 25% of the total value of contents insured in some policies.
- Some companies like HDFC Ergo and ICICI Lombard offer policies for more than one year which can save you renewal hassles and possibly some money. But evaluate your need before opting for the tenure.
- Almost all companies have non-occupancy clause; ie: they will not settle your claim if the house is unoccupied for a period more than 30 days without intimating the insurer. Find out about this clause and opt for the company which has the longest period.
- Some policies have a co-payment clause- ie: the insured is required to pay the first 5% of the claim or 1% of the Sum Insured against a particular section. These limits vary from one company to another and can be found by reading the fine print. For example, the policy by Bajaj Allianz has such stipulations.
- Generally for structural protection, companies reimburse the loss on the basis of reinstatement value.
Which Home Insurance policy can be chosen?
We have evaluated Home Insurance policies by 6 insurance companies in the country on the basis of various parameters. Policies by HDFC Ergo and Tata AIG can be avoided due to a comparatively high premium. The policy by Bajaj Allianz can also be avoided due to the comparatively low coverage amount available, even though the premium for this policy is the lowest among the comparison set.
You can consider policies by Reliance and Future Generali as the premiums for these policies are less expensive and these policies also offer you the essential features. If you do not mind a relatively higher premium, you can consider ICICI Lombard’s home insurance as you have the option of choosing a higher tenure for both own and rented properties.
While we have attempted to give you a comprehensive analysis, we advise you to read the individual company prospectus carefully as this product has differences in finer details and the individual requirements may vary from person to person
For further information contact Prajna Capitalon 94 8300 8300 by leaving a missed call
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