The insurer bears the risk of damage and destruction to the structure of your house and compensates you for this loss. You have to pay a premium for the benefit. Based on the premium you pay the structure of your house is insured for an amount called sum assured. You can also insure the contents of your house with home content insurance under a householder’s package policy. If you stay in a rented house you can avail only home content insurance and not home insurance for the structure.
Why buy Home Insurance?
Protects your structure
Helps pay for the replacement of the structure of your home, if damaged in a natural or manmade calamity.
Protects your contents
A householder’s package policy, compensates you against damage and loss of the contents of your home.
Minimum It is very cheap
It can be very costly to repair the damage to the structure of your home. The premiums on home insurance are a pittance compared to this loss.
You can avail special cover for jewelry and precious items in your home. Alternate accommodation if your home is under repair.
Key factors to consider for Home Insurance
Take a basic fire and allied perils insurance policy
- Hit by an aircraft
- Damaged in an explosion
- Deliberately set on fire (arson and malicious intent).
Householder’s package policy
- A much better home insurance policy for you is s a householder’s package policy. You have to pay a higher premium than a fire and allied perils policy. You are covered for damages suffered to the structure of your home by fire and allied perils.
- You are also provided a cover for the contents for your home (Furniture, electronic items, jewelry, art) destroyed by a fire and allied perils, theft or burglary and mechanical and electrical breakdowns.
How does a home insurance policy pay you for damages?
- You live in a posh area in a metro city. You have availed a comprehensive home insurance policy popularly called HPP (Householder’s Package Policy). Unfortunately due to a flood the wall of your house is severely damaged. So how the insurer does compensates you for the loss?
- In a home insurance policy you are compensated only for the repair/reconstruction of the structure of your house.
- The insurer is not concerned with the location of your home. It can be in a posh area or a cheaper area. The insurer considers the cost of replacing the structure of your house and is not concerned with the location of your home.
How does the insurer calculate the value of your house?
- The insurer calculates the cost of the damaged structure of your home on the market value basis. The market value basis is the actual cost of the structure of your house (say the cost of the wall of your house) damaged in the flood.
- The insurer accounts for depreciation (wear and tear of the wall with age).
- You are given the difference of the cost of the asset (wall of the house) minus depreciation (determined at a fixed value).
How is your claim settled in home content insurance?
- Costly electronic gadgets of your house or furniture are destroyed in a fire/short circuit. Are you given a new electronic gadget or furniture set to replace your loss? No, the value of the asset (Furniture or the electronic gadget) is given to you after accounting for depreciation.
Standard Fire and Allied Perils Insurance:
- This insurance covers most kind of damage caused to the house due to a fire, riot, floods or even a storm.
Burglary and House breaking insurance policy:
- Covers loss of assets due to a burglary.