An individual purchasing a home is looking for safe, stable and affordable housing before taking the plunge. Aspects such as the location, the work history of the contractor or the builder responsible, quality of construction material, best financing options etc are looked into in detail. However, we do not pay attention to risk management related to the structure of the house.
Insurance for independent homes
If you own an independent house, you could look at plans that cover the structure and its contents. One has an option to either choose a cover for the structure on reinstatement or indemnity basis. If you choose to insure the structure of the house on reinstatement basis, in case of a claim the insurer will offer the current construction cost of the house, excluding the land value. If you choose an indemnity cover, the insurer will take into consideration depreciation on the cost of construction depending on the age of the building while deciding on the claim amount to be paid. It is advisable to go for a home cover on reinstatement basis if you own an independent house.
One can also insure contents of the house, including jewellery and portable equipment, with an all risk policy, which offers a cover against a range of hazards such as fire and allied perils, burglary, theft, natural calamities rioting and other malicious damage. Moreover, the policy comes with features such as new for old, wherein the damaged equipment is replaced by a new one of the same kind and capacity. For a comprehensive cover of R50 lakh for the home and R5 lakh for its contents, on reinstatement basis, the annual premium would be around R6,300.
Insurance for apartment owners
Apartment owners should look at home insurance covers on an agreed value basis. New apartment owners can insure their flats for an amount that takes into consideration the value of the property as per the sale deed. Those who already possess an apartment and are looking for a cover can insure it on an amount based on the valuation report or the property rates declared by the local authorities. This cover is relevant for homes in multi-storied buildings where apartment owners do not have complete ownership of the property.
This policy offers full compensation that would allow you to buy another apartment in a similar area or locality. The policy also comes with an in-built cover for rent for alternate accommodation, in case of total loss as well as a cover for contents. For an apartment worth R1 crore with contents worth R5 lakh, the annual premium would not be more than R9,000 for a year.
Home insurance plan for tenants
Tenants can also buy a cover for the contents of their rented apartment, including portable equipment, and valuables in their home. They could look for an all risk policy for their contents, which would cost around R4,000 annually for a Rs 5-lakh cover.
Unlike other general insurance plans, a home insurance plan comes with an option to insure the property for a longer tenure, up to a maximum of three years. Also, the cover does not come with any waiting periods. Make sure home insurance is also a part of the checklist when you purchase your home since it is an investment of a life time.
The author is chief technical officer, non motor, Bajaj Allianz General Insurance