Unlike motor insurance, home insurance is not compulsory in India. Buying a home involves a huge amount of money and therefore, must be rightfully safeguarded. As an immovable asset that appreciates in value, home insurance is always recommended.
What does home insurance include? It is a type of property insurance that safeguards your asset and covers losses due to theft, fire or any other calamity. A comprehensive home insurance can have one or more additional features included with the base insurance. This can include coverage for the structure, losses and contents of the property.
Let us take a look at the different types of home insurance available in India:
- Structure insurance
Structure insurance covers losses due to structural damages. They include natural calamities like floods and earthquakes, other man-made calamities and terrorist attacks.
- Content insurance
Content insurance, as the name suggests, covers losses due to damage of contents within a home. They include furniture, appliances, jewellery etc. The value of these items is based on the market value when the loss occurred.
Critical aspects of home insurance that you need to consider:
Type of policy
Homeowners can opt for structure insurance to safeguard their property. If you are homeowner living in your home, opt for a comprehensive insurance that covers the content as well. Tenants can opt for content insurance as it can be assumed that the owner would have the structure insurance.
Sum insured
For structure insurance, the sum insured refers to the amount required to reconstruct the home. This is not based on the market value of the home. This value is called reconstruction value or reinstatement value. For content insurance, the sum insured refers to the value of the article after current day depreciation rate.
Home insurance premium
To calculate home insurance premium we need to consider the following:
- Built-up area
- Reconstruction cost per square unit of area
- Value of contents within the home after depreciation
Sum insured = Built-up area x Construction cost per sq. ft + value of contents after depreciation.
The premium is further based on two factors and they are: Layout of the house and construction materials (for instance, use of expensive materials for construction such as marble flooring further increases the premium) and location of the property. For instance, homes that are located in earthquake and tsunami prone areas, areas of high crime rate, and repeated flooding can incur a high premium as well.
Policy renewal
Remember to keep a tab on your policy expiration date. As calamities can strike anytime, it is advisable to renew your policy before policy end date to ensure maximum protection.
Do not expose your home to unnecessary risks. Ensure you avail the right kind of home insurance for your dream home.
