Home » What does the home insurance cover and the types?

What does the home insurance cover and the types?

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A home is one of the most important and biggest investments in a person’s life. It is the place where a person can relax in peace in the company of his loved ones; so it is natural for him to think about the insurance coverage for his house. Home insurance covers the residence against natural calamities and hazards as mentioned in the policy. There are important items in the house like the furniture and appliances like television, refrigerator, washing machine, gold, silver, or painting that the people may keep. These can be damaged by fire, earthquake, or floods, which can result in financial hardship to a person. The various types of home insurance cover all the above situations and also the death of a person or his spouse under the personal accident add-on (with nominal additional premium).

The banks and home insurance companies in India offer different types of home insurance policies and some of the most popular ones are-

  • Standard fire and special perils policy-

The standard fire and special perils policy provides coverage to the home insured against loss and damages due to-

1) Fire, lightning, earthquakes, storms, floods, forest fire, typhoon, tempest.

2) Damages due to activities like riots, strikes, terrorism, and other anti-social activities.

3) Damage due to bursting of water tanks, pipes, etc.

4) Damage due to leakage from automatic sprinkler installations.

  • Home structure/Building Insurance-

When you opt for this insurance you get covered for losses to the building i.e. the base foundation, walls, and roof.  If it is due to natural/man-made calamities listed in this policy, you can make a claim. It also covers the fixtures in the house that are there in the bathroom, kitchen fittings, and ceilings.

  • Personal accident-

This insurance covers the insured and his family that is residing with him, and compensation is given due to body injury directly caused by accidental external visible means that result in disablement or death.

  • Burglary and theft-

The policy covers loss or damage to the property by theft due to housebreaking, burglary, robbery, and if any valuable content is damaged or stolen.

  • Content Insurance-

People spent money not only on the purchase of the house but also on the contents that make their life comfortable. Now anything can happen to the contents inside the house and they can be damaged due to fire, theft, flood, or other accidental means, and the television set, refrigerator, washing machine, portable equipment, etc. are therefore covered.

  • Tenants Insurance

The tenants residing in a building should have this insurance if they have rented a house as it covers their contents.  The landlord insurance does not cover your personal belongings like electronic items, furniture, etc. As an example when you are working and accidentally there is fire due to negligence and it spreads to other apartments you would have to incur the cost of repair of other apartments. The home insurance for tenants covers two areas- one is the liability coverage that covers tenants if they or their guest damage the building and the other is content coverage that deals with the replacement or repair of damaged items.

  • Landlords Insurance-

The landlords’ insurance covers you against risks associated with renting your property and in case the rental unit becomes uninhabitable due to some mishap, it will cover the loss of rental income. The damage to property covers the damage to the structure of the property due to fire, storm, or damage due to vandalism.  It will also compensate for the loss of income in case the rental property becomes uninhabitable due to fire or storm. You may opt for additional coverage like natural disaster insurance, rent guarantee insurance, and landlord content insurance.

Exclusions under home insurance-

The exclusions are-

  • Intentional destruction of the property.
  • Damage to articles of consumable nature.
  • Manufacturing defects in electrical and electronic appliances.
  • Damage and loss due to war and nuclear attack.
  • Civil war and insurgence.
  • Mysterious disappearance and unexplained losses.
  • Theft and burglary claims if the house is continuously unoccupied for 45 days.
  • Act of terrorism.

How is the valuation calculated?

In the home insurance, you are compensated for the damage done to your home and property, and the amount of compensation you will receive depends on the valuation of the home. The home can be insured in two ways; one is the market value and the other is the reinstatement value.

In the case of market value whenever there is a loss, depreciation is levied on the asset depending on its age. The amount that an insured receives is not sufficient to replace the property.

In the reinstatement value method, the insurance company pays the cost of replacement depending on the ceiling of the sum assured. One of the conditions is that the damaged asset should be repaired in order to get a claim. Most of the policies insure the structure of the home for reconstruction value which is the cost that will be incurred to reconstruct the house if damaged and not the market value as the market value is dependent on demand and supply factors.

How much home insurance is needed?

The insurance should be enough to cover the cost of rebuilding your home if destroyed. You can multiply the built-up area of your home with the local construction rate per square foot. If in doubt the insurance agent or the insurer would be able to help you out. All the contents in the home like durables, clothes, furniture are valued at the current market value of similar items after taking into account the depreciation. Premium depends on the value insured and the coverage that is taken.

Home insurance is not required by law but it is always a good idea to have home insurance coverage. Most people can’t afford to rebuild their homes or make big repairs if their home is damaged; but in adverse circumstances which are not under your control, you may have to pay from your own pocket to rebuild your home. If your property is damaged by fire, storm, or other events the insurance will help to pay for the repairs. It is a good idea to insure your home and its belongings.

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