Should you buy a home insurance?

Be grateful for the home you have, knowing that at this moment, all you have is all you need. Buying and owning a dream home is an aspiration all of us have and it is one of the most important financial decisions you will need to make. Have you ever thought of protecting it? We think you should.

To begin with, we are not talking about insurance of home loan.  Your home loan needs to be paid off to the lender in the form of EMI over the tenure of the loan. This liability needs to be repaid to the lender, irrespective of whether you are alive or not. In case of your untimely death during the term of the loan, your family members will need to repay the loan. We shall cover this topic separately.

Be careful when loan agents sell you a product with your home loan, it is home loan insurance and not homeowner or home insurance.

Under construction apartments are liability of builder and it is his responsibility to insure it. While a building is under construction, it should ideally be covered under a project insurance policy taken by the builder. This means you can not buy the insurance for under construction building. Sometimes, after the construction is finished, housing societies get the structure of the building insured.  However, once your apartment/house is handed over to you , it becomes your liability.

What is Home Insurance

A home insurance policy is a special form of insurance product, also referred as homeowners insurance, which protects your home from threats situations like Burglary, Aircraft damage, Fire, Lightning, Riot, strike, Storm, cyclone, flood and many more. In case of many unforeseen situations, this insurance shall cover your back and save you from financial losses.

Why should you buy a Home Insurance 

First reason that should come to your mind is the condition of Indian real estate industry. Most of the builders in in this country have no regard for your safety. From substandard materiel to poorly managed societies, only thing they want to do is make money. Many fire incidents have been reported from newly constructed group housing societies. The fire sprinklers did not go off. What makes the matters worse is, the ill trained security guards switches off fires alarms by terming them as FALSE ALARMS. Fire is not the only reason. Poor security arrangements and non functioning CCTV are another big reason. Burglaries are on rise and claims of their tier securities are falling flat.

Situation doesn’t get better when you own an independent flat/kothi/bungalow and not a group housing apartment. Fire, flood, theft, strike and many such issues can still affect your homes.

So, if you are scared enough and would want to read more about Home Insurance, we can proceed…

Benefits of Home Insurance

  • Get comprehensive coverage to both content and structure of your home.
  • Secure your assets from any mis-happening.
  • Buy home insurance policy is cheaper than than other insurance policies.
  • Reduce stress and tension level for you’ll have a home insurance to fall back to, in case of unforeseen circumstances.

How much does it cost

Expect it to cost around 10000/- for a mid sized apartment. The cost varies from plan and type of building. It is advised to get in touch with insurance companies to help you understand the costing. Here is a quick calculation done on a insurer website which shows final amount for 5 years term.

home Insurance

What all should be covered

Home Insurance comes in many flavors and you have an option to choose the riders. Although most of the standard product covers basics, we list down some important aspects that must be covered.

  • Insuring the structure: The cost of insuring the structure against damage is as low as Rs 50 per Rs 1 lakh. Keep in mind that you don’t need to insure the house for the value of the property but only for the cost of reconstructing it. The costs can vary from Rs 1,500 per sq ft for a basic no-frills structure to Rs 2,500 per sq ft for a premium construction. So, a 2,000 sq ft house should be insured for Rs 30-50 lakh and the cost will be Rs 1,500-2,500.

  If you own an apartment in group housing society, you may want to check if society’s insurance policy already covers the structure and to what       extent. You may want to ask your agent to adjust the premium accordingly.

  • Fire or a Flood: A fire or a flood may not damage the structure, but will ruin everything else inside the house. So you also need to insure the contents of the house against the damage. The cost of insuring contents worth Rs 10 lakh against natural and man made calamities is just Rs 255
  • Burglary & House Breaking : This is another important aspect and can be added with a nominal cost. The contents of home are also covered against burglary or theft. The coverage will also be extended to silver articles, jewelry, precious stones and other valuable items, provided these are kept in a locked safe within your home premises.
  • Earthquake Cover: The policy offers coverage against loss or damage to any of the insured property. However, many policies do not cover flood or overflow of the sea, rivers and lakes due to earthquake.

Other good to have things:

  • Riot, Strike, Malicious and Terrorist Damages.
  • Shock, subsidence and Landslide (including Rockslide) damage etc

What can not be covered

  • Loss or damage caused by wear & tear and depreciation.
  • Loss of cash, loose precious stones, jewelry or valuables, unless specifically mentioned and valued.
  • Loss or damage caused by war, invasion, act of foreign country.
  • Loss or damage caused by nuclear war.
  • Loss, destruction or damage caused to any electronic equipment due to over-running or excessive pressure.

How to choose a good policy

Home Insurance policy is just like any other insurance product. Keep in mind the standard things like:

  • Avoid unnecessary add-on covers.
  • Check claim settlement ratio.
  • Bargain and shop around for best pricing.
  • Read the fine print carefully.

The Logical Buyer wishes you a happy and safe stay.

Read about home loan insurance here: Home Loan Insurance plans, are they worth it?

4 thoughts on “Should you buy a home insurance?

  • September 14, 2015 at 9:03 pm
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    Thanks for the well written article. This is one concept which Indians are still not very familiar with. Those who are, most of them tend to ignore it. I also believe that our homes should be adequately insured.

    I have one question for TLB. Assuming that I had taken a cover for jewellery as well and that has been stolen. How difficult will it be to convince an insurance company about the value of stolen jewellery? Do we havevto proove that the jewellery of XX amount has been stolen?

    Thanks in advance.
    Anuj

  • September 14, 2015 at 10:18 pm
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    Anuj,

    Only jewelry that is declared in advance is covered. The claim process involves submitting copy of FIRs. To be on safer side, companies like ICICI only let you declare maximum 25% of total contents as jewelry. For example, in image above, if total value of contents is 10L, jewelry can only be 2.5L.

  • September 21, 2015 at 11:34 am
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    I have covered my flat and its content by two different insurance . 1) For flat(structure only) I have taken a 10 years insurance for 30 lakhs @Rs 6500 Premium . In case of damage due to any reason (as covered by policy ),company will pay amount for reconstruction of flat area only.But issue is that for common area etc we or builder need to take separate insurance .2 ) For content I am having Policy for New India Insurance from last 6 years and for a sum assured of Rs 6 Lakhs ,I am paying premium of Rs 2200 only. I have not covered gold or jewelry in it . But this insurance covers breakdown of electronics appliance ,which is the best thing about this Policy .

  • September 23, 2015 at 8:32 am
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    Dear Amit,

    For common areas, you need to check with builder if he has already covered the areas in group insurance policy.

    It is advised to either opt for a locker facility or cover the jewellery. Breakdown of electronics or theft of such items is rear. What is more common is theft or jewellery like items.

    Also, it is advised to opt for only a single policy that covers this all. It shall help in easy process of claim if there is any need.

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