Tips For Buying Home Insurance

Home Insurance by and large has remained a low propriety among us. One of the main reasons for this is the low awareness and low ratio of risk occurrence. But frequent natural calamities like in recent times and  increase of  theft and burglary has raised a major concern towards financial loss arising from such risks.Many a times it have a long lasting impact on our financial well-being. Thus adding home insurance in your priority list will help in mitigating various kind of risk associated while we are living in our dream home.

Having said that home insurance is not a standard product. It is offered as a packaged policy wherein you have to select the type and kind of coverage you wish to have.

Lets understand what is there in home insurance and how you should go about selecting yours-

Building

In general the structure of your house is covered standalone also. There are two ways through which you can get the coverage for your house building – regular annual premium payment or you can buy a 10 year policy by paying premium upfront. Insurance companies offer some discount on a 10 year policy. In covering the building if it gets damage due to the listed perils then the company pays an amount equivalent to reinstating it. Put simply the  insurance company here will give you the cost of reconstructing the house . The only hitch which most of us have found here is that this does not cover the cost of land. Due to this reason people who have individual houses avoid home insurance since land cost is  a major portion of the total value of house. However, damage of land will be in worst situations like earthquake etc.. In all other situations where the house gets damaged you will be able to recover the financial loss if you have covered it through insurance.

Contents

The coverage for contents in the house comes as a packaged policy. Internal structures like wooden and glass work, electronic and electrical items, cash and jewellery, and all other items which are lying in the house can be covered through this policy. The major coverage involves fire and other perils, theft and burglary which is a necessity. Additionally most companies also gives  coverage for loss of house rent, increased living expenses., personal accident coverage, liability for damage to third party and  others. In general there will be 11-12 sections  from which you  have to choose few. There are discounts on premium payments which companies offer based on the number of sections you cover. Not all may be beneficial.What you select should be based on your requirement. If you are running a personal accident policy then you may not need the section here. Similarly increased living expenses are something which you may avoid. The choice of sections here should be based on a detailed evaluation.

 The Documents

Initially all general insurance companies use to see the bills and other documents during the claims. While issuing the policy a list of content along with value and declaration from owner was sufficient. But from last few years,based on some bad experience,s companies have started taking documents or proof during the application only. So for electrical and electronics items the company will seek serial number or any other number which can identify the items being insured. Similar steps are taken for electrical items. Wooden work and glass work may still be covered on owners declaration. But in general you will require identification of the product to be covered for which keeping bills of purchase is wiser option.

Know The Exclusions

Much like any other insurance home insurance too have limitations in some cases and permanent exclusions in some. For example it does not give claims for war etc.. but earthquake and terrorism gets covered with an additional premium. Similarly there might be maximum limit  on insurance amount for few items while most of them get claimed on  reinstatement basis i.e. new for old. Also if the value of item is more than the total sum insured then the claim is given on proportionate basis. Like this you should be well aware of the exclusions and limitations in the policy.

How Should You Buy?

While buying a home insurance policy few important facts you should take in consideration:

1. Building: Although buying a 10 year policy saves you money it has one caveat. If in these 10 years the construction cost increases then you will be able to claim only up to the amount of insurance. Hence keep this factor in mind and take insurance for the valuation which can cover the increase. Today companies have started giving covers where the coverage amount increases by a fixed % annually which may be  a good proposition.
2. Contents: While selecting the contents from the packaged policy evaluate your requirement as to what is more important to you. Items which are very very old or content where you can bear the small cost may not need the coverage. Essentially cover those where you may have  a larger financial implication. Prepare  a list of items in your house so that you have a clear idea on what is essential for you and where you can bear the cost. If any item is 10 year old covering it will just add your premium but may not benefit you in the insurance. Add deductibles wherever possible.  For electronic and electric items safety equipment’s helps in getting more coverage for less payout. The below chart shows one of the ways you can select the coverage for your house-

Source:ETWealth

Claim Preparation

Although companies are taking certain precaution like serial number etc.. of necessary items you also need to keep records to avoid any hassles during claim. Where ever available procure the bills. Many of us do work like wooden or glass fittings without any pakka bill. In such cases photograph of such items can be handy during claim. Some companies demand for all document while some may not. Today even video of contents of your house can be a handy tool. If bills are not there warranty cards also are acceptable documents. Whatever it be procuring bills of items you purchase do good from many perspectives so make it a  habit.

There is lot of emotions go behind your dream house. Many of us spend a good money to ensure it has everything of your liking.It is almost a family affair. But there are always risk associated which have larger financial implications. The viable option to mitigate this risk is to buy a home insurance.

Share your views in the comments section……