A house is one of the biggest investments of a lifetime. It takes much effort, both financially and emotionally, to be able to purchase one’s own house. But some risks can destroy our abode.
Where there are risks, there is insurance. For risks to our homes, there is home insurance. Most people buy this cover along with their home loans. It ensures to a degree that their finances are unharmed from various housing risks such as fire, calamities, or theft. But many still don’t know how home insurance functions.
Here are some important points on home insurance that you must consider.
What is home insurance?
Home insurance is taken to safeguard against the financial losses caused due to damage to or loss of your property. There are two variants of home insurance: one that covers the loss of the property’s contents, and the second that covers losses caused by damage to the property’s structure. Content insurance covers electronic goods, furniture, jewellery, and other valuable items. Structure insurance includes covers for damage to property due to natural calamities.
Is home insurance mandatory?
It is essential to purchase home insurance to safeguard your investment. However, it is not mandatory to buy home insurance as neither law nor regulatory authorities like RBI or IRDAI have made it mandatory. Many people have this misconception that it’s mandatory to buy home insurance when taking a home loan. The fact is that there is no such compulsion. It is your decision which you can make after deliberating upon the pros and cons.
Types of home insurance
Decide on the type of home insurance cover based on where your home is located and the type of property. For example, if you live in a region prone to natural calamity, consider buying structural home insurance. If you live in a standalone property that is not prone to natural calamity, you may prefer buying only the content insurance.
Adhil Shetty, CEO, BankBazaar, explains, “While choosing a home insurance policy, check the exclusions and the extent of coverage it allows. Compare the various policies available in the market based on factors such as premium size, variety of add-on cover, and suitability.”
Quantum of home insurance cover
When deciding the cover size of the home insurance, first assess the value of your property. You may contact an expert to estimate the value of your property. If you are planning to purchase content insurance, make a list of all the valuable goods which, if lost, may cause you financial damage. Assess their values. You must read the terms and conditions of the insurance policy to know for which items claims are not available.
You can get your home insured for either cash value or the replacement cost. In actual cash value option, you get the claim on the replacement value of the property after depreciation, whereas, if you go for replacement cost, on a claim, you’ll be entitled to receive the replacement value of the item.
Review home insurance every year
Review your home insurance requirement every year so that your home doesn’t remain underinsured with an enhancement in the value of your home. “Over a period of time, your requirement for the type and size of home insurance may change with a change in your income and the value of your home content,” points out Shetty.
Avoid giving false information
Do not conceal any material information from the insurance company. For example, while giving the details of the building, you should furnish the exact size, height, map, location, and floor plan of the building. If you provide details related to contents, you should furnish the exact number, weight/ size, etc., and keep the bills ready as proof. You can also buy different add-ons as per requirement and home insurance value.
Protect your home
* One variant of home insurance covers loss of the property’s contents
* The second variant covers losses due to damage to the property’s structure
* It is not mandatory to buy home insurance when taking a home loan
* You can get your home insured for either cash value or the replacement cost
