'The ability to ask the right question is more than half the battle of finding the answer.'
- Thomas Watson
This quote by one of the finest businessmen of his time, who took his company to extraordinary heights, highlights the importance of asking the right questions. Asking such pertinent questions is also important while buying an insurance policy.
Some people buy home insurance, but have doubts regarding the inclusions and exclusions. Here are a few vital questions you need to ask while buying home insurance:
Question 1: What is the extent of coverage provided? Does it include damage due to all causes?
Ans. Home insurance covers damage to home due to hurricanes, floods, storms, lightning, earthquakes, etc. Even if a car rams into your home and your home is damaged, you can file a claim. However, there are a few exclusions like damage caused due to war, willful destruction of property, etc. Similarly, you might need to buy additional covers to cover loss caused due to certain events.
Question 2: Suppose my home is damaged and all my possessions are lost. Would home insurance cover everything?
Ans. Home insurance coverage is available for the structure, the content or both. ‘Structure' means the actual building. ‘Content' refers to your belongings like household appliances, electronic items, etc. If you buy content insurance, your belongings will be covered in the event of damage. Remember in case of a claim, your insurance policy pays only the depreciated value of your belongings.
Question 3: How much sum assured should I opt for?
Ans. The sum assured should be based on the cost of rebuilding and refurbishing your house as well as replacing the assets lost. The best way to ascertain this amount is to find out the cost (per square feet) of constructing a house in your area and multiply it by the area (built up) of your home. For the contents of your house, list your assets (including jewelry). It total value should be the sum assured.
Question 4: What if my home is destroyed and I have to avail rental accommodation? Would home insurance compensate me for the rent?
Ans. Yes. You can avail optional cover for such rental accommodation when you are insuring the structure. This cover will compensate you for the rent paid for such alternative accommodation. Do note that this cover is available only when you insure the structure.
Question 5: Would damage due to terrorist attacks and riots be covered?
Ans. Generally, home insurance policies cover damages due to riots. However, you can avail optional cover for damage due to terrorist attacks also.
Suppose you are standing somewhere and someone pushes you. You fall down and recover. But you are shocked and disoriented. Similarly, burglary, floods, fire and other natural calamities damage your home, disorient your life and derail your finances. While home insurance cannot prevent such eventualities, it can cushion the financial shocks so that you recover faster.