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Non Life Insurance - Buying cover for your home? Here's what to keep in mind

14 Jun 2012

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For most of us, there is no bigger pride than owning a home. And, while we often put our life’s savings into buying a home, we rarely realise that our home needs protection in the form of insurance too. However, since it is an important cover for everybody to have, here are some important details to be aware of while buying home insurance.
Importance of home insurance:

Your home is, perhaps, the most valued possession in your life. It is, therefore, essential to take all precautions to protect this valuable asset. Despite the best security and fire protection systems installed, thefts can take place, and fires can still cause irreparable losses. But, there are other risks as well, such as natural calamities and breakdown of domestic appliances due to voltage fluctuations. Insurance can play a vital role to make up for such financial losses.

The householders’ package is a single policy that covers all major risks associated with home and its contents, such as furniture, jewellery, television set, refrigerator, washing machine, fragile items, such as plates and glasses, to name a few. against losses arising out of fire, burglary, and theft. All policies cover calamities such as earthquakes by default, however, a cover against tragedy such as terrorism needs to be opted for additionally. Moreover, such policies can also be customised by including personal accident, public liability and baggage cover. There are also pre-underwritten options of coverage and premium to choose from in home insurance plans offered.

Challenges of buying home insurance:

Most people pay the least attention to home insurance. And, while you choose the best accessories for your home, securing it should be of prime importance too. These days, banks also provide an option to avail of insurance for the home, along with your home loan. And, while this is a beneficial feature, one should understand what it does and does not cover, in addition to details such as cost and what to do in case of a loss. In addition, applying for home insurance could be an extensive process involving a lot of details and paperwork.

This however, is slowly changing today with insurers offering simplified plans with convenient packages to choose from and fewer details to be provided. This has started attracting customers towards home insurance. A crucial aspect of your home insurance would be to assess the sum insured. While you spend thousands of rupees on accessories to enhance the aesthetic value of your home, you would be surprised to learn that the premium costs could be as low as Rs 5 per day, in comparison with the total value of the property. It is, therefore, highly recommended that you buy this product after understanding all the aspects involved.

Thumb rules to assess your home insurance:

The sum insured and premium of your home depends on its present market value or cost of rebuilding the same, in case of a calamity. Hence, valuation of the house is an important issue. You should also know that insurance would cover the cost of construction only. This excludes land value, but includes, the builtup or carpet area, apart from construction quality. While determining the sum insured, the area and location of the house should also be considered. This is because the sum insured is decided on the basis of reconstruction of the house, which would differ from location to location. For instance, the cost of construction will be higher in a metro city than in a small town.

(The writer is a chief technical officer at Bajaj Allianz General Insurance)

Source: Financial Chronicle BACK