Home Insurance
Home Insurance
Protect your
priced possession
Here are 6 things you must know about home insurance which will
help you choose an apt policy for your home
F
By Parag Gupta
or most of us Indians, our homes
are our biggest asset. It’s a place
that gives us comfort, peace and
security. Everyone is very emo-
tionally connected with their home as it’s
a fruit of their hard-earned money. But
how many of us have insured it?
With the news of flooding from various
parts of the country, there is a renewed
focus on the need to insure one’s home.
The destruction that such calamities
bring leaves some destitute and forces a
huge financial setback on many. With a
little planning ahead, this can be avoided.
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To ensure protection of this priced
possession from such unexpected calami-
ties, a home insurance cover is essential.
Listed below are 6 things one must know
about home insurance that will help them
choose an apt policy for their home.
1. Building and contents
There are two kinds of home insurance
policies - basic fire insurance policy and
householder’s package policy (HPP).
Basic fire insurance covers the building
against fire and other perils including
lightening, storm, flood and riot. Some
policies may include earthquake and
landslide as well, if not you may have
to get them as separate add-ons. HPP
covers the contents along with the build-
ing structure against the same perils.
It also offers add-ons to cover contents
against burglary, damage, mechanical or
electrical breakdown. One can also get an
additional cover against acts of terror-
ism. Tenants can get standalone insur-
ance for contents as well. For items that
travel with owners like laptops, cameras,
jewelry etc. One can get an additional
away-from-home cover as well to protect
against loss or damage outside the house.
2. Market value or reinstatement
The sum assured can be decided in two
different ways: based on cost of items
insured or the cost of reinstatement.
When the sum is decided based on cost of
items, the cover is reduced with time as
the goods gets depreciated. Typically, the
building is depreciated at 2% annually
for a period of 50 years. While this cover
may be cheaper, it will not be sufficient to
replace the items insured. A better option
is to insure the cost of reinstatement -
that is the cost it will take to replace the
item with a comparable quality of item.
Keep in mind that this sum is typically
paid against the actuals only after the
replacement has been made.
3. Deductibles
One way of reducing premium for the
insurance is by accepting a higher
deductible. Please remember that higher
the deductible, higher is the out-of-pocket
expense. If one chooses to have some
deductible, one must make sure it is low
enough for her to be comfortable paying
it at the time of a claim.
4. Ask for discounts
Many insurers will provide a discount if
additional insurance policies are taken
out from the same insurer - for example,
coupling in a vehicle insurance with
home insurance may reduce the overall
premium to be paid. Installing anti-theft
systems, deadbolt locks and impact-
resistant roof can reduce home insurance
premiums significantly.
5. Alternative accommodation
and legal cover
While this is typically ignored by most
home owners, getting a cover for alterna-
tive accommodation is a must. Especially
if the insurance is for reinstatement, as in
this case the monies will only granted af-
ter the building structure is rebuilt which
may take a significant time. Equally a legal
cover is needed to cover any liabilities
arising from an accident on your premises
- this could be someone getting an electric
shock while operating some appliance
at your home or the damage caused by a
falling tile hitting someone’s car.
6. Re-evaluate sum insured
To ensure that the house is not under/
over-insured, it is advisable to re-evaluate
the cover needed every 5 years or so. This
is because the costs of building and con-
tents will change with economic cycle and
inflation. At the time of claim, if it turns
out that house was under-insured all
claims will be paid out in same reduced
proportion - even if the claim is only for
part amount. On the other hand, over-
insurance translates into unnecessarily
high premium being paid every year.
Several lakhs or a few crores are spent
in buying a house in India depending on
where you are buying it. Investing a few
thousand rupees per year to safeguard
what may be your biggest investment is
certainly a prudent decision to make.
(The writer is chief underwriting officer,
Bharti AXA General Insurance)
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