How much home insurance do I need for my home loan?

I recently applied for a home loan, and the bank is urging me to buy home insurance. My property in Gurgaon, measuring about 1,500 sq ft, is valued at ₹3 crore, and my loan amount is ₹2 crore. However, the bank has sent me a quote with a sum assured of only ₹2 crore. Should I purchase the insurance from the bank? And should I ask for the sum assured to be increased to ₹3 crore?

- Name withheld on request

Home insurance in India follows the standardized Bharat Griha Raksha policy, which offers similar coverage across insurers. If the insurer recommended by the bank is reputable, you can consider buying the policy through them or any other credible intermediary.

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Regarding the sum assured, banks often align it with the loan amount, but this approach is flawed. A property’s market price includes both land value and construction cost. However, standard home insurance policies cover only the cost of rebuilding the house—not the land.

To determine the correct sum assured, you should calculate the reconstruction cost, which is typically based on the per sq ft construction cost in your area. In Gurgaon, this would be approximately ₹60 lakh for a 1,500 sq ft home. This is the appropriate sum assured, not ₹2 crore or ₹3 crore.

That said, some insurers offer specialized home insurance policies where the sum assured is based on the total market value of the house. In such cases, the full ₹3 crore can be insured, and in the event of a total loss, the property title is transferred to the insurer in exchange for the payout.

My base health insurance policy of ₹5 lakh expires in September. I plan to buy a top-up health insurance policy of ₹50 lakh with a ₹5 lakh deductible in March. How will the claim process work in terms of meeting the deductible threshold?

- Name withheld on request

A top-up health insurance policy kicks in only after the deductible threshold is crossed. The deductible is calculated based on claims incurred within the policy period of the top-up plan.

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Since you're purchasing the top-up policy in March, the deductible will apply for claims made between March and February of the following year. For instance, if you incur a claim of ₹10 lakh in April, your base policy will cover ₹5 lakh, and the top-up plan will pay the remaining ₹5 lakh.

However, timing matters. Suppose you have two claims of ₹5 lakh each—one in January and another in April. The top-up plan will not cover the second claim because the deductible threshold was not crossed within a single policy year. Your base plan will cover ₹5 lakh, but the remaining ₹5 lakh will not be payable under the top-up plan.

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To avoid such gaps, consider a top-up policy with a lower deductible, such as ₹2 lakh. This would reduce the risk of being out-of-pocket in situations where multiple claims occur in different policy periods.

Abhishek Bondia is a principal officer and managing director at SecureNow Insurance Broker Pvt. Ltd.