Home Insurance

Home Insurance

The value of real estate investments is constantly increasing, mainly due to the scarcity of land in urban areas and the demand for it, due to population explosion.

However, while people spend an awful lot of money on acquiring a property, furniture & dĂŠcor, appliances and upholstery for their homes, they are in general indifferent when it comes to home insurance. Very few people appreciate the need or understand the risks of not having an insurance cover in place.

Given the fact that home insurance is relatively inexpensive and offers protection to an individual’s most prized possession, there is certainly a case for more people to seriously consider home insurance policies, as a financial risk mitigation measure. Here is all you need to know about home insurance to take the plunge and benefit.

Why do you need home insurance?

India is predisposed to natural and manmade disasters. As the seismic map of India below shows, around 59% of the land area is susceptible to earthquake hazards. In recent times Latur in Maharashtra, Bhuj district in Gujarat and parts of India bordering Nepal have experienced earthquakes and tremors of varying intensities.

Moreover, most of the coastline in peninsular India is prone to cyclones and a large part of India is vulnerable to floods, the impact of which is aggravated by unbridled and chaotic urban development that interferes with waterways causing inundation. In the last decade or so Mumbai and parts of Maharashtra, Uttarakhand, J&K, UP, Andhra Pradesh, Orissa and quite recently Chennai and parts of Tamil Nadu have had to deal with death and destruction due to floods.

What does home insurance cover?

A home insurance policy provides you security against damage to the structure of your house due to threats such as fire, earthquake, flooding, vandalism, etc. Optionally, you can also cover your material possessions from unexpected loss and burglary. If you live in your own house, you can buy a comprehensive policy that covers both the structure of the building as well as its contents, but if you live in a rented house, you can only insure the contents of your home.

Inclusions in coverage Fire, burglary and theft Riot, strike and malicious damage Earthquake, flood, lightning, landslides, etc.

Bursting or overflowing water tanks, apparatus and pipes, leakage from sprinklers Explosion and implosion Missile testing operation and aircraft damage

Exclusions from coverage Loss or damage by the insured or his employee Loss or damage to any illegally acquired property Cash, cards, stock or other documents Loss or damage occurring when the home remains unoccupied, for a long period (usually 30 days) Section of the house used for commercial purposes Painting, works of art and antiques However, a fundamental requirement is that the asset or property for which you need insurance must be in your name. In the case of a housing society or an apartment block, the office bearers of the housing society or association can acquire the policy. The policy in such cases will cover the society building, as well as all the utilities that are common and are owned by all members of the society.

Policies for housing societies will however have higher deductibles as compared to individual homes. Home insurance basically covers the cost of damage or loss,

allowing you to repair the damage and refurbish your home. As with all insurance policies, there are house insurance policies to suit different pockets. So, a premium policy may cover earthquakes, floods, etc. apart from fire while many others may not. It is important that you subject the different options available to a thorough scrutiny, before zeroing in on the best policy for you. The idea is to make sure that the policy covers your home against all risks it could possibly be exposed to.

What are the various insurance coverage options available?

The basic idea of home insurance is to get an adequate cover to rebuild your house in the event of unexpected damage. The value of your cover can be arrived at in 3 different ways. These are reinstatement value, market value and agreed value.

Agreed value option is the most desirable and as the name implies, here the insurer and the insured come to an agreement on the value of the re-building cost of the house and its contents. However, most insurers do not offer this option. The next best option is reinstatement value. Here, the insurance covers the cost of replacing the contents or structure or both. Market value is another option where you get a depreciated value of the items covered All your material belongings must be included in your content cover without fail, as you cannot be selective i.e. you cannot exclude the furniture and choose to have a cover for the electronic items and jeweler alone.

To arrive at the value of insurance cover, all you need to do is multiply the floor area of the house by its current cost of construction and allow for some escalation.

Make an itemized list of all valuables and add their cost to arrive at an overall value.

[Source: http://perilwise.info/2016/08/18/home-insurance/]