SMART SOCHO: Why insuring your home, is a must today

The devastating earthquake that struck neighbouring Nepal left all of us shocked with its massive trail of destruction to life and property. Unfortunately even our best brains in the fields of science and technology haven't been able to come up with a foolproof advance warning system that can predict these natural calamities that claim thousands of lives each year leaving behind a trail of damage and destruction to property worth billions of dollars in their wake.

There is an easier way to avoid the brunt of damage at least to your property - by opting for home insurance. Consider the facts. For a majority of us Indians, our home and property are undoubtedly our biggest assets in a country whose estimated 57 percent landmass is vulnerable to earthquakes of severe-to-moderate intensity. Yet according to industry experts, less than 1 percent of people who can easily afford home insurance actually end up buying it.

It takes a colossal tragedy like the one suffered by our neighbouring country, for us to make frantic inquiries with insurance firms about insuring our homes and as most insurance companies would acknowledge this flood of inquiries recedes once the tragedy fades from public memory. 

In most cases, the two biggest factors responsible for people not buying this much-needed form of insurance are two major misconceptions – the buying process is a tedious exercise and the costs involved are prohibitive. Nothing could be further away from the truth.  

What is Home Insurance:
According to online portal Policybazaar.com, home insurance provides protection for the loss or damage to personal property and possessions against natural (fire, storms, earthquake, tornado, cyclone, flood, landslide, lightning) and man-made (fire, burglary, theft, aircraft damage, malicious damage, terrorism, strike, riot, explosion) calamities.

However, what is covered and what's not, usually varies as per the individual policy of the insurance company and the contents of the specific plan. For instance, many home insurance plans exclude terrorism, strikes, riots and explosions.

Normally, there are 3 insurable components in a Home Insurance policy. These include the structure (building), the contents (material assets) and people (family members and third party). Buyers can also opt for a specific coverage either for the structure or the contents of their home. Alternately, they can go for a comprehensive coverage that includes both the structure and the contents.

Those opting for coverage of the contents in their home should try and include things like expensive belongings, electronic goods such as laptops and televisions, precious items like gold and jewellery and expensive appliances like air-conditioners, washing machines, refrigerators, kitchen appliances and furniture and furnishing items.

However it needs to be pointed out here that coverage on some contents like jewellery and other precious valuables may be subject to a ceiling in some cases. Some home insurance policies do specify that the cover for such valuables will not exceed 25 percent of the total contents insurance cover sum or INR1 lakh - whichever is lower.

Furthermore, an expensive item like say an air-conditioner or flat screen television is insured for its market value after depreciation, and not the price you paid for it. Ergo, if you brought a flat screen for INR 45,000 five years ago, the insurance company will only pay for its value (approx. 18000-24,000) post depreciation.

Items that are normally not covered by home insurance policies include: willful destruction of property, loss/damage/destruction caused by - negligence, wear and tear, civil war and nuclear weapons.

Some of the other notable exclusions not covered under the structure and content categories of a home insurance policy also includes: under-construction property, a residential property that is being used for official or business purposes and kachcha construction, while specific contents like books, manuscripts, money, bonds, shares, securities, consumables and vehicles are also excluded.

How much do I have to pay:
Contrary to popular belief, buying as home insurance policy does not cost an arm and a leg. For example, a 1,200 sq ft home can easily be insured for approx INR 50 lakhs against natural calamities for under INR 2,000 a year. Pay an additional INR 500 p.a (approx) and you get to insure your precious contents worth about INR 10 lakhs.

There are several companies in India that offer excellent cover for your home against natural and man-made disasters at reasonable rates. Some of the leading players in this segment include – HDFC Ergo, Bharti AXA, ICICI Lombard, New India Assurance Co, Tata-AIG General Insurance and Bajaj Allianz to name a few.

ALSO READ: Mah govt acquires Ambedkar's UK home