Wall leakages, cutlery, plants and more; all that a home insurance may cover

Home insurance is a product that provides cover against financial loss to your house due to accidents or theft. It not only covers the structure of the house but also its contents, depending on the policy features and riders. Although important and one of the cheapest insurance products, home insurance is not popular among populace. One can get a coverage of Rs 50 lakh for just Rs 5,000 premium per annum, says Naval Goel, CEO & Founder of PolicyX.com.

Home is the most valuable asset for most people. You never know when an earthquake, flood or sudden fire may damage your property. Besides, when it comes to the safety of household belongings, burglaries have always remained a threat factor. You may have emotional connect with many things at your home that can never be replaced, having a home cover will give you financial stability in the event of a catastrophe or burglary.

Although unfortunate incidents may happen even when you are home, chances of preventable fire and burglaries are higher when you are away. So, if you don't want to buy a long-term policy, you can consider a short-term policy. Digit Insurance has a home cover that you can buy when you're away on a holiday or an official trip. "If you are out on a travel, you hire a guard to protect your house. For the same or even lower amount, you can buy our home protection cover," says Vivek Chaturvedi, head of marketing and sales (online), Digit Insurance. The premium for this short-term burglary-cover starts at Rs 199 for Rs 2 lakh sum insured. This is a good way to get a hang of the policy before migrating to a comprehensive one.

Beyond exceptional events, Goel says that home insurance includes even minor damages and leakages. "If the roof of your house gets damaged due to wind or storm and need an urgent repair, you can directly claim for the benefits of home insurance. Or if there is any leakage found in the roof or walls due to heavy rains and hailstorm," he says.

In a home package policy, one can cover furniture , fixtures and prized belongings, as well as items such as cutlery, musical instruments, pet and plants against fire, burglary and accidental damages, says Subrata Mondal, Executive Vice President, IFFCO-Tokio General Insurance Company.

Accidental damage of household equipment while shifting or from any other reason, contents kept with children living outside for purpose of study, and jewellery items kept at home as well as bank locker are also covered, Mondal adds.

How is home insurance structured?                

A typical householder policy comprises 10 sections under which it covers various risks - Section  I : Fire & Allied Perils - a) for house building and b) for household contents; Section - II: Burglary & Housebreaking including larceny or theft (Contents only); Section - III : All Risk against valuable items; Section - IV : Plate Glass Cover (fixed); Section - V : Breakdown of domestic appliance; Section - VI : Television Sets (All Risk) cover; Section - VII : Pedal Cycle (All Risks) cover; Section - VIII : Baggage Insurance; Section - IX : Personal Accident Insurance and Section - X : Public Liability & Workman Compensation Risks.

At least three to four sections are mandatory to include in the policy and only Section I-B (Fire & Allied Perils) cover against household contents is compulsory. The more sections you choose, the more comprehensive the cover becomes.

How to calculate required coverage

There are three ways to fix the coverage of the policy:

1) Market value: The insurer will pay you the amount that you may have received on selling your house at that point in time. It factors in depreciation.

2)  Reinstatement value: The house will be valued based on total cost required to reconstruct the house. The land value of the house is not included.

"When investing in a home insurance plan, it is advisable to go for a reinstatement basis, because then the insurer will pay you against the cost that will take to rebuild your house in the same spot, the same size and same quality of construction at today's costs," says Goel of PolicyX.com.

3) Agreed value: A few insurance companies provide cover on the basis of the agreed value. The agreed value factors in the land value and the cost of construction both. In the event of a loss, the insurer pays the 'agreed value' to the policyholder and takes the ownership of the house.

Key things to know

It is important to value your house appropriately as underinsurance may cost you dearly at the time of the claim. For example, if the value of your house is Rs 10 lakh and you have taken an insurance of Rs 6 lakh, that is, 60 per cent of the actual cost, the insurer will pay you 60 per cent of Rs 6 lakh, that is, Rs 3.24 lakh.

Goel advises to check if the insurance will provide accommodation charges during the reconstruction or repair of the house.

Notably, the basic evaluation of home insurance differs for homeowners and tenants. "If you are a homeowner, the insurance cover will depend on two factors - the cost of construction (building cover) and the bouquet of contents cover. However, if you are a tenant, cover for contents at home is sufficient as building or structure is not a financial obligation on them," says Mondal of IFFCO-Tokio General Insurance.

Besides, you must check the claim settlement ratio (CSR) of the company before you buy a home insurance policy. It is important to disclose all material facts related to the risk covered to avoid claims rejection. Also, one should keep necessary bills and vouchers handy to ensure seamless claims proceedings, advises Mondal.