As soon as you purchase the home of your dreams, a sense of triumph settles in. However, those feelings can turn into the opposite if anything tragic happens to your dream home.
This is why the concept of insurance was introduced and is immensely highlighted and advised throughout decades by financial experts. Insurance enables us to safeguard the things we care about and work hard for, hence, a home insurance policy is extremely important to invest in.
Broadly, a home insurance policy is divided into two types of coverage- Damage caused to the structure and loss of content (personal belongings). In a policy that covers only the structure, it would protect the structure of the building from any damage caused by natural calamities/fire/vandalism/fallen trees/remains falling from an airplane crash.
In a policy that covers the loss and damage of your personal belongings, your policy will protect you from theft/vandalism/fire/floods/earthquakes.
It would be wise to invest in a policy that covers both these aspects (Structure+Content) which is commonly called a comprehensive policy. While deciding on such policies, it is advisable to choose the ones most suitable to your home and that covers mostly all aspects, as this would increase the value of your coverage and will also give you the best value in return.
Bear this Things in Your Mind Before Buying Home Insurance in India
1. Due diligence (understanding insurance and your needs)
This is the most important step to take before you invest in any kind of product. Knowing what the product is and what it does for you, will put you in a better position to make decisions for yourself.
To make the right choice, you need to know what an insurance policy is, what it protects you from and what is the adequate amount of coverage you need for your home (assess your property value to know how much coverage makes sense for you)
To calculate the correct value, you can even approach an experienced home builder who could tell you how much your home is worth and how much it would cost you to replace/repair your belongings. (if you renovate your home after you purchase a policy, get your home value assessed again as new construction increases your home value)
Evaluate your needs and purpose of investing in insurance and choose your home insurance policy accordingly. (you can hire insurance experts who could tell you what perils you should protect yourself from)
2. Compare Policies
Just like you try on multiple jeans before you buy the one that fits you perfectly, Insurance policies also need to be treated the same way. There are multiple sites online where you could compare home insurance policies and these are some pointers that you should keep in mind while comparing- policy should be of a reputed insurance provider (the financial strength and claim settlement ratio of the insurer matters), coverage, exclusions, and premiums.
Just make sure you do your research thoroughly to make a thoughtful and wise decision.
3. Terms that are important to know and some guidelines to follow (Unusual property insurance cover, Building cover, Contents Cover and deductibles)
A. Unusual Property Cover - if the property you are trying to cover has a unique feature (roof, attic, etc.) or it’s a mill/listed building or any other property having an unusual characteristic will need a special cover whose premiums are usually higher as the risk would be higher too.
B. Building Cover - If you are intending to purchase a building cover (covers only the structure) ensure that your building is covered for the rebuild value and not the current market value. Rebuild value is the entire cost of reconstruction and not the current market value.
C. Content Cover - If your policy covers your personal belongings, make sure you have made a list of every one of them (from electronic gadgets to clothes).
Once you know what you have, make a list of your contents that can be covered in your policy (Expensive items might not be covered in a home insurance policy although, to protect them, you can invest in a separate policy or add a rider to your home insurance policy.)
Another wise thing to do while you purchase such a policy is to invest in the “new for old” cover for your belongings, which means, if anything happens to your belongings, they will be replaced by new ones instead of getting reimbursed.
Lastly, always remember to calculate the value of your belongings accurately. This might leave you underinsured if you have calculated the value of your belongings less and overinsured if you have overvalued them, because of which the cost of investing in a home insurance policy will increase unnecessarily.
D. Deductibles - Deductibles are a certain amount of money of the claim amount that the homeowner needs to pay, while the rest of the claim is paid by the insurer.
It is important to be aware of the deductibles while purchasing a policy so that you are prepared to pay for it while filing for a claim (Instead of standard deductible amounts, you can even choose higher deductibles to reduce your premium)
4. Actual cash value and Replacement cost
It’s important to know the type of coverage you are going to receive as your home can either be covered for the actual cash value or the replacement cost.
Actual cash value is the amount of money you will receive to repair or replace your item after deducting the depreciation.
Whereas, replacement cost is the amount of money you will receive to repair or replace the item without deducting any depreciation.
5. Earn Discounts
The sole purpose of an insurance policy is to protect you from tragic incidents and the sudden financial burdens that come with it. Although, if you help minimize the risk of these tragic incidents, insurers will help you earn a discount on the cost of purchasing policies. (lesser premiums or more coverage)
Here’s how you can earn discounts.
- Fire alarms and extinguishers
- Sprinklers to take out fire
- Security alarm for robberies/vandalism
- Well maintained stairways, sidewalks, fire exits, etc.
- If you live near a police station or fire brigade
- If you have not filed for a claim in the past one year from the purchase of your policy, inform your insurer and they might discount your premiums.
6. Read the policy carefully and be cautious while filling the application form
Reading any document that you need to sign on is an advice that has been given time and again by all kinds of well-wishers and no matter how important it is, a lot of people still don’t practice this habit and end up being a victim of fraudulence.
Hence, read your home insurance policy document carefully so that you know everything about the product you are investing in and there are fewer chances of someone taking advantage of you. In other terms, avoid being a victim of different insurance frauds.
Even while filing an application form, be cautious and authentic about the information you give out to avoid any scope for mistakes from your end which will lead to further investigation and delays in claim processing.
If the insurer identifies the inauthenticity of your application, they would most likely accuse you of faking your way to receive policy benefits.
7. Add on covers/riders
Sometimes, investing in a standard home insurance policy might not be enough. Adding a rider to your policy helps you increase the coverage that would enable you to protect your precious belongings too. For example - The expensive items (Jewellery, electronics, etc) that you want to safeguard from these dangerous situations can be protected by adding a rider to your standard insurance policy.
Buying a home is a huge accomplishment and I'm sure you’d want to protect under any circumstances. If you have been a victim of misselling or claim rejections, it is quite difficult to see the light ahead, but our experts at Insurance Samadhan are here to help you through it all! Leave your home insurance-related grievances to us and we will make sure we help you see the light! REGISTER HERE
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