Such plans cover man made as well as natural disasters including perils like fire, storms, terrorism, earthquakes, cyclones, etc. Like every other insurance plan, it is crucial to understand the fine print and policy terms before signing on the dotted line. Here are seven integral terms of a
home insurance policy simplified for easy understanding:
SUM ASSURED
What is it?
It is the maximum amount that is received as a benefit if the house is damaged.
REINSTATEMENT & MARKET VALUE
What is it?
These are methods of loss assessment of the insured.
How is it calculated?
Reinstatement value is the cost to rebuild the house with current rate of construction. Market value is the current price of any valuable item (adjusted with depreciation).
Where is it used?
While Reinstatement Value Method is used to determine the valuation under Structure Insurance, Market Value Method is used for Content Insurance.
RIGHT TO INSPECT
What is it?
It refers to a right of the insurance company to inspect the damaged premises.
Why is it important?
Denial to get property inspected may lead to rejected claims. The insured needs to cooperate with the company's agent or surveyor who visits the property to gauge the extent of damage to structure and/or contents. They do so in order to submit reports to the company for processing the claim.
FRAUDULENT CLAIMS
What is it?
A fraudulent claim is one where the insured tries to benefit someone else on his behalf to avail compensation under the policy by using unlawful means. This term substantiates the Duty of Disclosure point. Such claims are never entertained by the insurance company.
SCOPE OF COVER
What is it?
The extent or the scope of insurance policy that encapsulates various vantage points to lend a clear and precise view of what is insured.
Types:
Structure Insurance (covers physical structure of house) and Content Insurance (covers valuables inside the house).
BURGLARY & THEFT
Are They Same?
No.
What is it?
Burglary constitutes a break-in with the intention of theft or vandalism whereas a theft refers to the action of intentionally taking else’s property without permission.
Why is it important?
Home insurance plans cover losses due to burglary but not theft.
DUTY OF DISCLOSURE
What is it?
It refers to the due diligence that needs to be performed by every insured.
Why is it important?
Insurance is a relationship that is built on trust. In case the insured does not disclose necessary documents or provides incorrect information in the proposal form, personal statement, declaration and connected documents, the insurance contract could be considered invalid.
Home insurance plans are a great tool to combat unforeseen disasters and a must-have in your insurance portfolio. Easily available online, these offer financial relief and peace of mind in crises.