Home insurance covers the structure of your house, not the land

A home is perhaps the biggest asset for most people; the belongings in it comes a close second. It then makes complete sense to ensure that your home and its contents are adequately insured. In fact, some lenders require home insurance before they sanction a home loan to you. Irrespective of this, in all counts, home and property insurance is a critical aspect.

Home and property insurance coverage
Typically, home and property insurance covers the following:
Home and other structures coverage: The structure of the home is the main component and it is covered against any damage and fire. You can also insure additional structures such as a garage for instance.

Personal property coverage: Personal properties are covered in many cases under the home insurance. In some cases, you have to take add-ons to insure personal properties. You can also avail of personal property floaters that are additional cover for high-value items.

Living expenses coverage: Insurers also provide living expenses of a rented home in case of damage to the insured house, which has become unsuitable for residing temporarily. You can stay in a rented accommodation for the period the house is being repaired. There is a limit of 6-9 months or Rs1 lakh on the living expenses in a rented apartment.

Personal liability coverage: This covers the third party against any damage caused to them or their belongings when they were at your home.

How much coverage
The insurance coverage you need for your home and property depends on your requirement.

Some of the factors that impact insurance coverage are:
Replacement value of your home:  Insurance companies pay for the replacement value of your home and not the market value. For example, if you have a home with carpet area of 1000 sq ft and the cost of construction is Rs1,000 per sq ft, you will be covered for Rs10 lakh (1000x1000).

Replacement value of belongings: This is covered at market value, i.e. the current market value of the belongings with depreciation factored into it. For example, if an AC machine is  Rs30,000 and it gets damaged in the third year of operation, you will be covered for Rs30,000-15,000 = Rs15,000. We have assumed Rs5,000 depreciation of ACs every year.

Insurance protection for high-value items: A specified percent of high-value items are covered.

Factors impacting home and property insurance
The cost depends on various factors. One such factor is the location of the home. If the location is in an earthquake-prone area, the insurance cost will be more.

The other factor is the value of your property and contents. If you are insuring higher value items, the cost will shoot up.

Lastly, the cost also depends on the policy structure. If you have a high deductible, your insurance cost will be lesser.

Points to keep in mind:

Home insurance covers the structure of your home and not the land. Hence, in case of any damage, you will get claims on the structure only.

While it is tempting to rush and insure high-value items, you should weigh option such as locker facility for valuable items.

A study done in United States showed that customers can save up to 30% on homeowner’s insurance by doing due diligence in finding the best deal. In India, there is a variety in coverage from various insurance companies on home, property, third party, and additional living expenses. Check the details, compare, and then select one that is ideal for you. There are insurance companies that provide discounts on long-term insurance.

In case of property insurance, check the circumstances under which the insurance company will pay for the damages. There are cases where the insurance company did not pay when a certain property was taken out of the home. For example, you can insure a laptop against property insurance, but any damage to it when the laptop was out of the home may not be covered.

Finally, you are required to prove the ownership of the contents of your house. Hence, it is important to have an inventory and any possible documentation of the contents at home. Take pictures of the household items as this comes in handy when you claim against damages to your belongings.

At the same time, you should check with the insurance companies about the coverage of certain high value properties. They may not be covered under the usual property insurance attached with home insurance.

The writer is CEO, BankBazaar.com, an online marketplace for
personal, home and car loans