Slowly but surely, householder’s insurance – also known as home insurance – has started making waves, particularly after the devastation caused by the Gujarat earthquake and the Mumbai floods. More because a growing number of people have finally started realising the need to protect their dream homes and contents from natural disasters and other perils.
However, if you thought that you have ensured the peace of mind by opting for this cover, which will take care of the most valuable possession of your life — better do a reality check. For, if you miss out something before signing on the dotted lines, then you may not get compensated adequately in the event of any mishappening or may have to pay a higher premium.
Therefore, we discuss here 10 things which you must take into consideration while purchasing a home insurance policy:
1. Sum Insured (Building and Contents): The sum insured for building and permanent furniture, fixtures and fittings should be equal to the reinstatement value. Reinstatement value represents the replacement value of the asset at the time of damage or loss. “The basis for sum insured for household goods other than electrical, mechanical and electronic machines/gadgets under this policy is the market value. Market value for household goods means the procurement value of goods from the same or similar source at the time of damage or loss less appropriate depreciation. You need to ensure that the sum insured is adequately fixed for the insured building and contents to avoid under insurance average deductions at the time of claim,” says Rajiv Kumar, MD & CEO, Universal Sompo General Insurance.
2. First Loss Basis: If you think that all of your contents cannot be damaged or lost in any adverse incidents, which is the general case, then you should purchase a home insurance policy with contents insured on first loss basis. Here the insurer will not penalize you for under insurance in case of a claim. Universal Sompo General Insurance, for instance, offers Sampoorna Grih Suraksha on first loss basis. You can save money by insuring contents on first loss basis.
3. Mandatory and Optional Covers: A wide range of coverage sections are available and you should opt for coverages you need the most. Some important coverages under a home insurance product are Fire and Allied Perils, Burglary and Theft, All Risk (jewellery and watches), Plate Glass, Breakdown of domestic appliances, electronic equipment, personal accident, baggage cover, employee compensation, public liability, additional expenses of rent for alternative accommodation, loss of rent, repair costs etc.
4. Price: Select a home insurance product which offers maximum necessary coverage at the minimum premium. “Superfluous covers which you feel are not important can be opted out. Your home insurance product must offer this flexibility to select coverage as per your requirement and affordability. For example, if you live in a house fitted with less glass, then plate glass cover may be opted out,” says Kumar.
5. Exclusions: Pay attention to all exclusions under a home insurance policy to avoid confusion and denial of a claim. In each covered section you will find a list of things which are excluded under your policy. Specially look for exclusions under the All Risk (Jwellery and Valuables) section as any damage other than what is specifically excluded is covered under the policy. Also pay heed to general exclusions like war and nuclear risks, consequential losses, wilful misconduct, pollution etc.
6. Deductibles: Generally sections covered under a home insurance policy have a deductible which you need to bear from your own pocket before the claim payment is made by the insurer. “It is to avoid small claims to trigger. You need to check that deductibles should be not very high and select a product which is affordable from the deductible context,” informs Kumar.
7. Declarations: Be sure about declarations you make under your home insurance policy regarding occupancy, other businesses in the premises, address etc. These forms the basis of the contract and further claim may be denied and the policy may become null and void in case of any misrepresentation and non-disclosure.
8. General Conditions: Do not forget to check the general conditions about claim notification, documents required, alteration of risk and others. Check if there is any warranty which you need to fulfil throughout the policy term. Like for making a claim for burglary, an FIR with the police needs to be filed in a time limit. Being clear with all the conditions will help you at the time of distress.
9. Ease of Purchase and Service: Online policies are available from almost all insurers. These are easy to purchase and sales process is hassle-free. “Always call the customer care of your insurer in case of any confusion and check the service parameters of the insurer. Always look for an insurance company which is ready to extend help and fulfil its promise with excellent service delivery,” says Kumar.
10. Claim Settlement Record: The claim settlement record of the insurer should be looked upon. This is what you pay the premium for and should get satisfied that the insurance company will honour your claims in time.