How to pick up the right home insurance policy

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Updated: May 8, 2019 7:03:36 AM

Even a Lloyd’s Underinsurance Report last year had estimated that India has the second-largest global underinsurance. In the last two decades, India suffered losses of $80 billion, according to a report by the United Nations, from cyclones, floods and earthquakes.

General insurance, home insurance policy, cyclone Fani,  Odisha, West Bengal, insurance coverage, GDP, India, personal finance, home insuranceGeneral insurance: Home in on the right home insurance policy

As insurance companies gear up to assess losses caused by cyclone Fani in Odisha and West Bengal and process the claims, it would be wise for home-owners across the country to buy insurance cover for their properties against natural calamities and secure these against financial risks.

The coverage of non-life insurance is low in India—penetration (measured as ratio of premium to GDP) is less than 1%—and people have to pay mostly from their pocket to re-build their damaged homes after any natural disaster. Even a Lloyd’s Underinsurance Report last year had estimated that India has the second-largest global underinsurance. In the last two decades, India suffered losses of $80 billion, according to a report by the United Nations, from cyclones, floods and earthquakes.

Insurance coverage
Typically, a home insurance policy will cover natural calamities like earthquake, flood, cyclone, fire, and will cover man-made incidents like robbery, dacoity, riots, etc. Home insurance policies offered by general insurance companies cover both building and content. Under the building cover, one can claim the cost of repairing the damage in the structure of the building. The content insurance will include jewellery, electronic goods, clothing and furniture. A house insurance also comes with liability coverage which covers the policyholder against personal injuries, as well as property damage by third parties.

General insurers offer various types of home insurance covers. An individual can even buy and renew a home cover online without any documentation and physical inspection of property, unless someone is opting for a higher sum assured or a specific package. Experts say it is better to buy a cover right after taking possession of the house as insurers refuse covers for old houses. Many a times, banks and housing finance companies bundle home insurance along with the home loan.

All home insurance policies offer coverage to contents in the house against earthquake, flood, cyclone, landslide, fire, etc. Some insurers also offer holiday home protection policies which are short-term covers for the time when one is on vacation. It is better to opt for a longer cover which will save the hassle of renewing it every year, and one can get discounts on the total premium.

For those staying in multi-storeyed apartments, the housing society must insure the structure against natural calamities as it will help in case of any damage to the physical structure. The cover will take care of the construction cost of the building. People living in individual houses can opt for structure home insurance and a contents cover will ensure that belongings are covered against damage from natural calamities, fire or even burglary.

Read the fine print
Always read the fine print of a home insurance policy as insurers have their process to evaluate the loss caused in such situations. The policy document mentions all the exclusions from the cover. The insurers print certain conditions under which the expected claims are excluded and policyholders should be very careful while buying a policy and while filing claims. If they are not satisfied with the assessment of loss made by the insurer, then they must insist that the insurance company review the assessment before signing the discharge voucher for settlement of claims.

Most importantly, choose the right sum insured after assessing all your contents. An under-insured cover will not be of much help and you have to bear the financial burden yourself in case of any calamity. One must make an inventory of contents, estimate their market value and keep ownership documents of the contents ready. All covers will have standard exclusions such as wilful destruction of property, general wear and tear and atmospheric conditions. Also, look at add on covers by paying an extra premium. It will not only enhance the cover for your home, but also help in a hassle-free claim.

Pricing of home insurance
The sum insured for the house structure is evaluated based on the reconstruction or reinstatement value of the property. In case of contents of the house, such as electrical appliances, furniture, crockery, clothes, etc, the sum assured will be valued based on their market value after adjusting for depreciation.

Typically, the premium for the house covered for `50 lakh and contents for `10 lakh will be around `3,000 a year. So, a home insurance provides great financial hedging at a nominal cost.

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