Home Insurance : Cheap Yet Ignored Necessity

Home insurance continues to remain an ignored insurance product despite being an ultra critical necessity – what could be more important than protecting your precious physical assets and abode other than lives!

Protecting your home (including the structure of your house and its contents) against fire and special or allied perils such as lightening, storms and floods as well as burglary, theft and larceny are important and are covered under what is traditionally called a Home Insurance policy.

Remember, and we pray, that the probability of such perils may be low which is precisely why the premiums are low. But if , god forbid, this were to happen to you, the costs of rehabilitation would far outweigh the small premium you would have paid.

What the policy covers

A home can be insured under a ‘Standard Fire and Special Perils Policy’, which provides protection to your home building and its contents against damages by fire, natural calamities like earthquake, flood, cyclone, storm, and lightening, and also due to riots. The phrase ‘loss or damage by fire’ also includes the loss or damage caused by efforts to extinguish the fire.

A person staying in a rented house can also buy home insurance for its contents — of course, excluding the building. A long-term policy, for between three to 10 years, can also be bought to cover the home building alone. Such long-term policies offer a discount on the premium as the tenure is longer or at times, the insurance company replaces discounts with additional sum assured incrementally each year .

In addition to the above, you also have the option to buy a Package Policy covering various other contingencies in addition to fire — such as burglary and housebreaking, damages due to larceny and riots etc, Personal Accident Cover for the family members and legal liability to domestic servants and third parties.

Some policies also offer riders such as resettlement cover for situations when you need to relocate due to severe damages to your home. Despite the best security and fire protection systems installed by you, fire can still cause irreparable losses. A comprehensive home insurance policy helps you counter these situations without affecting your savings.

Exigencies such as physical or property loss of a third person caused by some accident at your home, for instance—a cylinder blast or perhaps a repair activity at your home may cause a loss to your neighbour’s property. All such contingencies can be effectively covered under home insurance by opting for public liability coverage.

How Much Home Insurance Do You Need?

Home can have risk on its structure and on the content inside. While estimating the insurance requirement for your home structure, compare your home value with the prevailing market cost to build similar property. Similarly, when considering the insurance for contents in your home, take into account all the belongings and make a list of all items, estimate its prevailing value, and accordingly get the adequate value of insurance

Similarly, when considering the insurance for contents in your home, take into account all the belongings and make a list of all items, estimate its prevailing value, and accordingly get the adequate value of insurance coverage.

What it costs

The typical amount is very nominal considering the total value of property covered and differs on whether the tenure is a single year or multiple years.

For example, for a policy covering a building valued at ₹1 Cr for one year, the premium is only about Rs 5000. Covering lets say Rs 1 lakh for each of the major contents may not even exceed Rs 1000 per year. If the same policy were to be for lets say a 10 year period, the per year premium may not be even Rs 3000 per year! In other words, you may pay about Rs 28000 upfront and get a cover for 10 years. Note however that this long term policy is only for homeowners and not tenants who can only cover content.

What Type Of Covers You Should Take Under Home Insurance?

While getting the insurance for the structure of your house, you may have the option to get the insurance value as per depreciated value method or the reinstatement value method. The depreciated value may fall short of realising the total cost of the property as depreciation may reduce the cover size. On the other hand, reinstatement method considers the cost required to rebuild the property if it is damaged, so it is better to opt for the reinstatement cover over the depreciated value cover.

PL Distribution offers attractive options in Home Insurance covers via HDFC Ergo.

To get a free quote or to advise you on the value of cover you may choose, please mail is at insurance@plindia.com

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