Things to keep in mind while buying home insurance

A home insurance policy ensures that you stay financially stable in case of damage to your property or valuable possessions inside. Thus, it is always advisable to get your home insured.

The task of choosing the right home insurance policy can be overwhelming for home buyers since there are multiple factors to consider. However, there are a few facets you must know about before selecting one.

Understanding home insurance and its coverage

Home insurance is a type of property insurance that offers coverage from the unforeseen loss or damage caused to the house structure and its content. House owners (for their own house) and tenants residing in a rented house can buy home insurance coverage.

Rakesh Jain, chief executive officer, Reliance General Insurance Co. Ltd, said, “In India, there are two types of coverage available. Structure insurance covers losses arising from structural damage of the home from natural calamities such as earthquakes, floods. And content insurance covers the loss or damage of contents inside a house like electronics, jewellery, furniture etc." However, the coverage you need depends on a few factors. Also, these factors affect premium of the policy.

Location of home: Your home location makes a big difference in determining what type of coverage you require. For instance, if your home is near the sea, you need protection for your electronic appliances that get easily damaged due to corrosion. Similarly, a natural calamity-prone region often gets affected by earthquakes, cyclones or floods. In that case, you need to ensure that structural and content damages are covered.

Type of home: Insurance coverage changes depending on the home you are insuring. Be it an apartment, a plot, bungalow or a rental property, the coverage can differ from each other as there are different risk factors associated with every type of home. This way, the usage of your property decides its premium since the use of the building directly deals with the kind of risk that may be involved with the building. Generally, the premium is higher for commercial buildings like offices, factories or warehouses.

Age of property: If the building is old, apartments in those buildings are considered most susceptible to damages and losses. In such a case, the insurer can charge a high premium. For instance, damage due to fire eruption in your apartment because of short-circuiting in the old electric wiring could cost expensive repairs, and the building being old may need to be rebuilt again.

Replacement value vs claim deduction: As per the replacement value cover, the insurer makes a payout that will be sufficient to replace the damaged objects with new ones. However, the insurer makes the payout in other options after deducting the depreciation. In this way, the latter type of home insurance policy costs are comparatively lesser.

Provide the correct information to your insurer: When you apply for insurance, it is imperative to provide accurate information about your property and the content inside. For instance, mentioning the level/floor of the property, exact buildup area, building/floor plan, number of white goods, details of valuables including jewellery will allow the insurer to assess the right coverage for your home insurance and offer the best protection. Providing incorrect or misleading information can lead to distress during a claim.

Know the exclusions in your policy: It is crucial to know things your home insurance policy doesn’t cover. Jain said many insurance policies list specific types of damage that they do not cover such as intentional destruction of property, loss and damage caused due to war, volcanic upsurge, seepage losses and contamination damage.

“If there are any exclusions that you would like to have in your home insurance policy, you must get add-on coverage if available," Jain added.

Add-ons available: A comprehensive home insurance coverage coupled with add-on covers tailored to your requirements is all you need to ensure your dream home is well secured. Add-on covers will help you in areas your standard home insurance plan may not cover. “Some of the add-on covers include protection for portable electronic equipment such as camera, audio-visual equipment, diagnostic and medical equipment, jewellery and valuables cover, terrorism cover, loss of rent cover. Moreover, you can protect your premises against burglary and housebreaking with specially designed add-on covers," said Jain. So, this way, keep these factors in mind while choosing a suitable home insurance policy.

Documents required for the claim process: While filing a claim, it is essential to remember that giving insufficient or incorrect information can get your claims delayed or rejected. Duly filled-in claim form, plan of the building, first information report (FIR) or fire brigade report in case of theft or loss, bills/receipts, KYC documents, cancelled cheque for receiving claim amount electronically are a few of the documents you might need depending on the type of claim. This will also ensure a smooth claim process.

Mint takeaway

Buying a home might be one of the significant investments in your life. And with the growing uncertainty, purchasing home insurance becomes a future investment that can help protect you from any substantial financial setback.