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Insurance Article

Home Insurance Guide for Novices

May 26 2015

Opt for a comprehensive home insurance plan to secure your valuable assets

When disaster strikes: Nepal Earthquake 25th April 2015

In the wake of the catastrophic event, the number of enquires regarding home insurance is rising, as the concern amongst homeowners in India is increases. People are realising the need to secure their important assets in the face of a natural calamity.

Securing your assets with a good home insurance policy is not only a measure of precaution, but also aids in rebuilding in the aftermath of natural disasters.

What does Home Insurance Cover and who do these covers apply to?

With home insurance, you can cover the structure as well as your belongings. Besides the basic cover, there are additional covers called riders or add-ons. Some riders are applicable only to homeowners, like the alternative accommodation cover. Other add-ons, like the terrorism cover, are applicable to both homeowners as well tenants. Choose add-ons carefully to meet your requirements.

How is the home insurance premium calculated?

Protect your home from financial losses

Protect your home from financial losses

Premium is a percentage of the sum insured. The insurer (insurance company) decides this percentage. The total premium you pay will depend on the type/s of insurance and the service tax levied by the government.

For structure insurance, sum insured will depend on the area (sq. ft.) and cost of reconstruction (per sq. ft.) For content insurance, sum insured depends on the estimated value of your content (valuables).

Consider the example of homeowner, Mr. Shah, whose house has an area of 1000 sq ft. Given the cost of construction of Rs 3500 per sq. ft. in his locality, the sum insured for the house structure will be Rs. 35 lacs. For a year, it would require him to pay just Rs.2100 for structure insurance. Mr. Shah also has content worth 3 lacs, including jewellery. His content insurance premium for one year would be Rs. 930 only.

If Mr. Shah also opts for a terrorism cover (Premium amount Rs. 380) along with alternate accommodation cover (Premium amount Rs. 50), all he has to do is pay a meagre sum of Rs 324 per month, i.e. Rs 3887 per year, for covering both the structure and the contents along with the add-ons.

Key Benefits

  • You can get comprehensive cover for both structure and/ or contents you store in your home and protect your property from fire, burglary, natural calamity etc.
  • By choosing to keep the policy for a couple of years at a stretch, you can avail of valuable discounts, further lowering the premium amount. E.g. For a three year policy you get 15% off on the premium that you would pay for a one year policy.
  • Timely insurance payments help families to comfortably cope with the process of rebuilding.

Factors affecting Premium

Besides the square foot area of your house and the current rate of construction pertaining to your location, other factors also play a part in calculating the premium.

  • How prone is the location to natural calamities like flood, earthquake, lightning, etc.
  • Frequency of incidents like burglary
  • Proximity to high risk areas, like a chemical plant, high-voltage electric pillions etc.
  • Based on these risk factors, the insurance company will decide the percentage of the sum insured that in turn would decide the premium. Opt for a comprehensive home insurance plan and ensure complete peace of mind.

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