The perceived cost of home insurance
About 93% Indians have not availed home insurance despite knowing its importance, according to a home insurance survey conducted by ICICI Lombard. The survey conducted across a user base of 2000, half of whom were in the age group of 36-40 years, revealed that 35% of these individuals did not buy it because they perceive it to be expensive.
Home insurance extends protection to the structure and contents of your home, and are of two types – structure insurance and contents insurance.
With the possibility of every second Indian home being prone to natural disasters and their high susceptibility to other manmade disasters, availing a home insurance is important. However, the survey reveals that in the past three years, only 66% of the respondents had availed a home insurance.
Home Insurance is Expensive: Busting the Myth
Almost 59% of the survey respondents said they would consider buying a home insurance if the premium were lower. In reality, the premium for a home insurance can cost less than a cup of chai a day. Really.
Consider this example. For a sum insured (structure) of ₹18 lakhs (a 1,000 sq. ft. built up house x construction cost of ₹1,800 per sq. ft.) and sum insured (content) worth ₹2.5 lakhs (including jewellery), the premium for five years would be ₹12,506, i.e. just ₹3,335 a year! Divide this per day, and it comes to less than ₹10.
It is important to remember that the premium is calculated based on the parameters of locality, cost of construction as well as market value.
Clearing Other Common Misconceptions about Home Insurance
- The Acts of God are Not Covered
There is the popular belief that home or property insurance does not cover the Act of God, meaning natural calamities like earthquake, floods, etc. In reality, coverage is provided against such disasters. In fact, 81% survey respondents bought a home insurance policy as a cover from floods.
The Buying Process is Complicated
With insurance companies going digital, buying home insurance is as easy as buying anything else online, contrary to the belief of 10% of the respondents. You only need to have handy the built-up area and cost of construction per sq. ft., along with the value of the home contents. Key these in and you can get a premium amount instantly.
- Need to be Bought Only with a Home Loan
At the time of availing a home loan, most people opt for home insurance also. However, this usually covers only the building structure and not its contents. Therefore, it is better to avail a comprehensive policy that also includes the content cover.
- Rented Homes Cannot be Insured
Even if you stay in a rented house, it is wise to opt for contents insurance. In fact about 25% of the respondents availed home insurance only to safeguard the contents.
The Growing Awareness about Home Insurance
On a positive note, there is increasing awareness about home insurance and its significance. At least 62% respondents know about home insurance and 45% respondents bought home insurance because they considered their home location to be risky.
With awareness, consumers seek multiple aspects from a home insurance product. 68% desire financial backup, while 31% want reduced terms and conditions from their policy. 17% feel they are safe and secure with a home insurance policy.
Consider the cost of rebuilding your home from scratch and procuring all your valuables. Now compare the premium for home insurance with this. You will see why it makes sense to opt for home insurance, to safeguard your finances.