Looking for home insurance? Here’s how to get a good deal

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Published: August 23, 2016 1:33:39 PM

Home insurance is a protective tool to safeguard against damage to your home or its contents. The ambit of home insurance ranges from protection against any structural damages to loss of valuables due to any natural or man-made calamity like fire or theft.

Real estate discount offers, homebuyers need to exercise cautionThe high costs of structural damage repairs and loss of valuable contents are both covered by a well-balanced home insurance plan. (Photo: PTI)

Rising real estate prices and growing financial awareness has meant that more home owners are today opting for home insurance cover than ever before. The high costs of structural damage repairs and loss of valuable contents are both covered by a well-balanced home insurance plan.

Here is a look at home insurance and how you can optimise your plan to get the best value for money.

Understanding home insurance
Home insurance is a protective tool to safeguard against damage to your home or its contents. The ambit of home insurance ranges from protection against any structural damages to loss of valuables due to any natural or man-made calamity like fire or theft.

Home insurance covers are also broadly classified into building insurance covers and content covers. A well-balanced policy is one that offers adequate protection towards both of these components.

Home insurance cover decoded 

The building insurance component of home insurance offers protection from both natural and man-made disasters. The content insurance component offers cover for precious and valuable movable and non-movable contents like furniture, jewellery, electronics, etc. Most insurance companies offer a basic home insurance policy safeguarding for structural damages. The additional layers of protective covers protecting against house break, insurance for valuable content, etc. are optional.

Many insurance buyers have the wrong impression that home insurance does not offer cover natural disasters. All home insurance policies offer protection against losses due to fire. However, to get protection against natural disasters like floods and earthquakes, you need to opt for an add-on cover.

In addition to the two essential components, you can also choose a third insurance component safeguarding loss of important documents like passport or other important identification documents in case of any mishap.

How much home insurance is sufficient? 

Your home insurance calculation should follow a simple formula of multiplying the covered area of your home with the average rate for cost of construction. So, for a 1500 square feet apartment with an average construction cost of Rs. 1000 per square feet, the minimum sum insured towards your structural component should be Rs. 15 lakh.

The value of your valuable contents and your geographical location for natural calamity risk assessment will help arrive at the final home insurance amount.

Ways to reduce your home insurance premium 

Buying a house can be an expensive proposition considering the rising real estate prices. This is one reason why many home owners either do not opt for home insurance totally or opt for a nominal one to ensure a low premium outgo.

Here are some ways in which you can lower your home insurance premium cost without compromising on the protection benefits on offer.

Club various insurances together: There are many general insurance companies that offer home insurance as well as other insurance plans like automobile insurance. A good way to reduce your costs is to opt for a single insurance company and clubbing your home insurance with other general insurances. This way you can bargain for a discounted deal. Growing competition means insurance companies are happy to pass on discounts to retain their customers.

Choose insurance cover carefully: Your home insurance needs to take into account the geographic area and your coverage needs. If you are in a high seismic zone that is prone to earthquakes, opting for an earthquake protection add-on should be a part of your home insurance plan. On the other hand, someone in a low seismic zone can seek a higher coverage towards natural disasters like floods etc. to ensure adequate protection.

Opt for a high voluntary deductible plan: A voluntary deductible simply means that you are willing to share the risk with the insurance company and pay a part of the damages when seeking a claim. Opting for a voluntary deductible reduces the risk of the insurance company, which then offers you home insurance at a lower premium.

Go long term: Opting for a long term home insurance policy can help you save a tidy sum of money as yearly premiums are much more expensive. A long term home insurance policy for, say, 10 years can reduce your premium to almost half of what you will end up paying if you renew your home insurance plan every year.

Buy online: Just like any other insurance plan, buying home insurance online can give you a discounted premium since you would be bypassing any distributors or commission agents between you and the insurance company.

Home insurance is an essential component of financial planning as it safeguards your home against any man-made or natural emergency. Tweaking your home insurance plan wisely can mean you get adequate protection without spending a high amount on your home insurance premium.

The author is CEO, BankBazaar.com

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