Purchasing a house is a large size investment, therefore caution and careful analysis are necessary to make the right decision and to avail the long-term benefits of home insurance. After all, most people buy a home only once in their lifetime. To assess the individual requirements of every customer, leading home insurance companies and banks in India offer a broad range of insurance for the home.
Understanding Homeowners’ Insurance
Homeowners’ insurance is a form of property insurance that covers losses and damages to the insurer’s residence, along with furnishings and other assets in the home. Homeowners’ insurance also provides liability coverage against accidents in the home or on the property.
What is not covered under Homeowners’ Insurance?
- Deliberate destruction of property
- Damages to property due to wear and tear
- Damage to property due to war
- Damage to property unoccupied for more than a certain specified period
- Money in the form of cash, antiques and collectibles
What are the salient features of home insurance?
1. Cover for Damages
The basic feature of any home insurance policy is to provide coverage against a variety of damages. Insurance for the home policies covers not only the house but any surrounding structures, along with your personal property or possessions, and also protects your alternate accommodation if any.
- Cover for the Structure
This is the basic coverage of every home insurance policy that protects the physical structure of the house / building against a variety of risks and damages. The structure of the house includes the building, electrical apparatus, heating, air-conditioning, plumbing, etc. Remember, the land on which the house has been built is never a part of the home insurance coverage.
- Coverage of Additional Structures
Along with the coverage of the house structure, an insurance policy also provides cover for any additional structures surrounding the house. The non-attached structures include detached garages, fence surrounding the house, a backyard shed, a retaining wall, the driveway, mailbox, pool, etc.
- Cover for Personal Possessions / Property
This covers the contents of the house against a variety of risks. It usually includes electrical appliances like television sets, personal computers, microwaves, refrigerators, air-conditioners, etc. along with furniture like beds, couches, dining tables, and furnishings like curtains, rugs etc. Often, expensive assets like jewelry are also included under this cover. However, for personal property cover, most insurance companies have limits for different items of personal possession.
- Cover for Alternate / Additional Accommodation
A salient feature of a home insurance policy is the Loss of Use cover or cover for Alternate / Additional accommodation expenses. The objective of this cover is to reimburse the policy holder / home owner for all living expenses which they might incur, in case of an insured cause of destruction or damage to the insured house. The cover includes additional rent, travel, food and any other living expenses which might be incurred by the homeowner towards their alternate living arrangements.
2. Cover For Liabilities
The insurance policy also covers the homeowner for any liability which may arise due to any damage to property or bodily harm caused to a third party. This includes liabilities which may occur not only within the house but even those which may occur outside.
- Liability Cover
Liability cover is one of the most important features of any home insurance policy. This cover protects the insurer from any legal liabilities which may arise in case of any damage or bodily harm caused and against any bodily injury or damage caused to any third person or property, on the premises or by the insurer. For instance, a liability cover for a tree from your garden (located in your premises) that falls on the neighbor’s fence and damages it. The neighbor might sue you for damages. In this case, the cost of repair or any legal charges of such an outcome shall be covered by the insurance company.
- Coverage for Medical Payments to others
The last feature of a home insurance policy covers any medical payment which the homeowner might have to make to any third person in case they suffer any bodily harm or injury when they are in your house or on the property of the insurer. This includes the cost of only minor injuries. Some of the examples include—
• Your child’s friend breaks their arm while playing on the swing in your backyard.
• A visiting relative slips on the stairs inside your house and injures their back.
• A neighbor slips in the ice formed on your driveway and injures their foot.
Popular types of insurance for the home
The variety of home insurance policies not only elaborate its necessity, but also helps homebuyers to choose the right policy suiting their requirements.
Let’s take a look at some of the primary and most popular types of insurance for the home policies offered in India—
- Standard Fire and Special Perils Policy
This type of insurance for the home is offered by every leading insurance company. Just as its title suggests, it protects against special perils and fire outbreak. This coverage can be bought by homeowners for their residing house as also by tenants residing in a rented house. The sum insured for this policy is calculated as Building—Cost of reconstruction (exclusive of land value). A Standard Fire and Special Perils policy covers the insured home against the loss and damages caused due to the following causes—
-Natural calamities like lightning, fire, volcanic eruptions, bush fire, forest fire, earthquakes, storms, floods.
-Damages caused due to explosion/implosion, man-made anti-social activities like strikes, riots, or other damage caused with malicious intent.
-Damage caused by direct contact of rail/road, vehicle. However, damage caused to the insured house with own vehicle is not included in this cover.
-Damage caused due to bursting or/and overflowing of water tanks, pipes and apparatus.
-Subsidence including rockslide and landslide.
-Damage caused due to missile testing operations.
-Damage caused due to leakage from automatic sprinkler installations.
- Home Structure/Building Insurance
This insurance for the home covers the structure of the house from any kinds of perils and risks. The policy further also protects any permanent fixtures within the house, including kitchen and bathroom fittings, as well as the ceiling/roof of the insured house. Some houses have garages, an outdoor room/house or sheds. Home Structure/Building Insurance usually includes these structures as well.
- Landlord’s Insurance
As a landlord, the maintenance and upkeep of the building/apartment/structure of the house (that you are renting out) is a huge responsibility. A standard building insurance policy usually isn’t exclusively designed for the need of landlords, because other residents live in the building. The Landlord’s Insurance for the home is specifically designed for landlords, it also covers things like loss of rent and public liability.
- Contents Insurance
This policy protects not only the insured house, but also the expensive and valuable contents inside the house. This type of insurance for the home policy protects the goods inside the house from damages and loss owing to theft, fire, flood and other such mishaps. The goods covered under the policy may include anything from documents, portable equipment, or even jewelry, TV, refrigerator, etc. This insurance especially helps when the insurer has to replace the interiors of house in case of floods, or when it has been burnt by fire.
- Tenants’ Insurance
If you are living in a rented house or flat, it is wise to opt for tenant’s insurance for the home policy instead of spending money for a building insurance. As a tenant, you must focus entirely on protecting the contents of the house. The Tenants’ Insurance is a must for every tenant. Though you live in a rented house, it is very much yours, at least, till the time you reside in it.
Other Insurance Policies
Apart from these five types of insurance for the home, as a homebuyer, you should also be aware of the following insurance policies—
- Public Liability Coverage
This type of insurance for the home protects guests or a third party if they experience damage caused to them or their property inside the insured’s home.
- Personal Accident
This insurance for the home covers the homebuyer and her family through compensation in case of permanent disablement or death of the insured person due to accidental or physical injury, even if it has happened anywhere in the world.
- Burglary & Theft
As the title suggests, this insurance for the home protects the insurer in case of an occurrence of burglary or theft in the insured house. If any valuable contents are stolen or damaged, the policy covers you for it.
Buying a home is a milestone in every individual’s life and the event is etched very close to the individual’s heart. It is a truly emotional moment that brings fulfillment of a dream. To not let your efforts go in vain, investing in a good insurance policy is crucial, as it protects your home from threats. So, do not wait for a calamity to remind you of the need of buying insurance for the home, opt for it well in advance!
Best Home Insurance Plans in India 2020-21:
1. HDFC Ergo Home Shield Plan.
2. New India Insurance Griha Suvidha Plan.
3. Royal Sundaram Gruh Suraksha Plan.
4. SBI General Long Term Home Insurance Plan.
5. Oriental General House Holder Insurance Plan.
For property insurance, the sum insured and the premium are calculated on basis of the property area, rate of construction (per square feet) and the location of the property. The insured sum of two houses of the same size can be different. The logic is similar to what goes into buying a house.
Contrary to the bank’s claims, there is no compulsion by the Reserve Bank of India (RBI) or the Insurance Regulatory and Development Authority (IRDA) for home loan applicants to buy any kind of insurance from the bank. Officially, the banks cannot insist you buy homeowners insurance from them.
Purchase the policy: The Home Insurance policy can be purchased online or offline. Most insurance companies will offer this policy online through their website. You can buy it and pay for it using online banking if the policy is bought online.