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Insurance Article

How is the Home Insurance Premium Calculated?

July 14 2015
How is the Home Insurance Premium Calculated

This knowledge can empower you to get the most appropriate cover for your house at the best price.

Home Insurance Premium
Home insurance premium breakup

Home insurance premium breakup


You need to protect your investment from losses due to theft and accidents like fire, explosions or any natural calamity. A home insurance policy does just that and more, by covering your house and your possessions within.

If you thought home insurance was expensive, think again. For a sum insured (structure) of Rs. 20 lakhs the premium for five years is just Rs. 4860. Read more to find out the key factors that influence your home insurance premium.

Home Insurance Premium

This premium is calculated based on factors such as the area (sq. ft.), cost of reconstruction (per sq. ft.) and the estimated value of the possessions.

Home insurance covers two key things - structure and contents. Homeowners can insure both, the structure as well as the possessions while tenants can buy content insurance to cover the possessions such as home appliances, clothes, and locked jewelry. In addition, both can opt for additional insurance for risks associated with terrorism as well as expenses towards rent in case an alternate accommodation is required.

Follow the steps below to calculate the premium on your home insurance:

STEP 1: Value your assets:

To insure your house' structure and your belongings, you need the following info:

1. Structure to be Covered

a. Total square feet area (a)

b. Cost of construction in unit currency per sq ft (b) - for example, the cost of constructing a house in Mumbai is Rs. 1800 to Rs. 2000 per sq. ft.

2. Total value of contents including jewellery

a. Value of jewellery (Y)

STEP 2: Use the online premium calculator to arrive at the premium

Get started by logging on to the online home insurance premium calculator page. Based on the ownership type (owned or rented) you can and fill in the details listed in step 1. Given below is an illustration for the 5 year premium payable for a sum insured (structure) of Rs. 21.6 lakh (a 1200 sq.ft. area x construction cost of Rs. 1800 per sq.ft.), plus content worth Rs. 5 lakh (including jewelry) plus terrorism cover and rent for alternate accommodation.

Some important things you need to know before filling up your policy details.

  • Total area of your house is the total built up area
  • Home structure insurance covers the cost for reconstruction and not the market value of the house. It is the cost incurred to reconstruct the parts of the structure that are damaged or destroyed
  • Contents of home include - furniture and fixtures, consumer durables, clothes, utensils, jewelry, etc.
  • The valuation of contents is decided as per their Market Value after depreciation
  • Maximum value of jewellery covered will be a certain percentage of total value of contents or 1 lakh, whichever is less
  • Home Insurance is an excellent way to protect yourself against the risks arising from untoward incidents. The premium you pay, to ensure financial backup in case of damage to your home and/ or belongings therein, is a nominal sum but provides great relief after unprecedented events.

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