Everything about Home Insurance

To own a home is the biggest investment of life and costs huge amount of money. The mortgage itself takes up a big portion of the housing budget, and property taxes and furnishings bump up the monthly financial commitment even more. Amongst all the other expenses that come with the ownership of a house another essential expenditure is of the home insurance. Home insurance, or hazard insurance or also known as homeowner’s insurance (commonly used in US real estate industry), is a type of property insurance which covers a private residence. It includes various personal insurance protections, including losses occurred to one's home, its objects, loss of use or loss of other personal valuables of the house owner, plus liability insurance for accidents that might take place at home or at the hands of the house owner within the policy territory.

It is a multiple-line insurance policy, which covers both liability coverage and property insurance by paying a single premium for all the risks. It is a legal contract of indemnity between the insurance company and the insured and will put the latter back to the state where he/she was prior to the loss. Normally claims due to floods, nuclear explosions or termites are excluded but in some cases special insurance can be purchased for such calamities like floods. Most policies don’t cover the damages caused by pets.

Why is home insurance important?

It is very important to buy home insurance as it protects your home and gives you a feeling of security.

Coverage of home structure: A house insurance policy covers the repair/rebuild cost in case of damage to the home structure. The amount of coverage determines how much will be paid by the insurance company for the rebuilding as it will calculate the necessary amount. Thus with home insurance, you are making yourself financially secure in case of damages.

Pays to Replace Belongings

A standard home insurance policy will also cover all the belongings in case of any serious damage. Making a list of the inventory will help calculate how much coverage is required and shall also be helpful in case of filing a claim. Premium items like antiques, artworks and furs often need a rider to ensure coverage which is nothing else but just an extra insurance for that particular object combined to the regular policy.

Provides Liability Coverage

The liability coverage of the policy covers the injuries suffered by others on your property; like someone could slip on the ice and breaks a leg or your pet dog can bite a delivery boy. So in case of all such miscalculations you can protect yourself with this clause afforded by the house insurance.

Fulfills Mortgage Contract Most of the houses are under the home loans and these housing loan companies would generally require a house insurance policy also because the lender has a financial risk involved in your house for which he needs an insurance policy. Rather that the housing loan company provides you house insurance from their own end it is always better to find one of your choice which is not just affordable but would meet your budget requirements also.

Your home is your biggest investment. A house is your biggest investment of life and its value keeps on increasing with time, unlike cars whose depreciation starts the moment it gets on the road. Keeping aside the market ups and downs, to own a house from a long term perspective is a kind of financial investment that provides you with a feeling of security for the years to come. And so protecting such an important investment should be on your top priority.

So these are a few of the key reasons why is it important to get the house insurance done.

Types of home insurance

Home insurance cover has two parts- contents insurance and building insurance, what to choose depends entirely on the needs of the insured. While building insurance covers the bricks and mortar for disasters like sudden weather changes, fire etc content cover will guard the objects against issues like burglary, loss and other kinds of damage. Building cover is for the actual house and covers permanent fixtures like roofs, walls, ceiling, floor, doors and windows. Content covers includes anything that can be moved out of the house may be your upholstery or carpets. It is better to take time and go around the house from room to room and make sure that nothing is undervalued and nothing is left uninsured. A standard building insurance policy covers complete cost of rebuild/repair in case of earthquake, storm damage, falling trees, fire, vandalism, lighting strike. Buying a combination of both from a single insurance company can often be more reasonable rather getting two separate policies.

Eligibility for Home Insurance:

There are certain criteria’s that need to be met before obtaining home insurance but these vary as each company has its own set of criteria’s. However, the minimal requirements common for most of the companies are:

• A Home Insurance Policy can be bought by companies or by individuals who are Indian residents and owners of a property which they want to get insured. Home Insurance - multiyear policy can be purchased by the owner of the house/flat.

• In case of a society the policy can be bought by any authorized member of the particular society’s managing committee. The policy will however be issued in the society’s name and will cover the society building as well as the belongings that are for common use of the society.

• In case of persons living on rent, they can get a content cover for their belongings. Contents insurance will cover your valuables against various losses like fire, burglary, smoke, lighting, flood etc and will include everything from furniture to electrical items including dryers, microwaves etc. one must carefully read the document before buying the policy as a tenant because the clauses vary from company to company.

There are different types of home Insurance which covers you against a wide variety of risks or damages.

A standard home insurance policy covers damage caused to the house by vandalism, fire, lighting, hurricane, storm or natural calamities. A policy also covers damage or loss of personal property due to theft, burglary or any such uncertain occurrences. Expensive items like jewelry, antiques etc can also be covered using additional rider policy coverage. A home insurance policy also has a liability coverage up to certain limits, which protects the insured in case someone else injures himself on his/her premises. Because in such cases, the insured will have to pay the medical costs in case the sufferer sues him. The option of extension coverage or umbrella is also available to increase the amount of liability insurance. The insured also has the option to get the cover for the Damage caused by vehicles. Other Optional covers include damage due to riots or terrorism with some limits over the extent of coverage. For instance, an earthquake cover can’t be given to an individual apartment; but the whole building society will have to opt for it. The theft cover will not pay out if the burglary takes place when the house has been left vacant for a period of more than a month or if the domestic servants are involved in it. A standard home insurance policy will provide coverage for jewelry of up to a maximum amount of Rs. 10,000 only whereas a separate all-risk policy will have to be purchased for more comprehensive jewelry.

A terrorism cover will provide financial protection to the house and its contents against any acts of terrorism which is a very important component in these times of international clash.

The cover for domestic appliances will protect various household appliances like ac, washing machine, refrigerator, microwave, LCD etc against damages from breakdown, theft and fire etc.

The Earthquake Cover is normally an in-built clause but in some cases can also be offered as an add-on cover.

Experts suggest that it is advisable to insure 100% of the value of home and contents by purchasing guaranteed replacement cost coverage. Guaranteed replacement cost coverage means that the insurance carrier will have to pay the cost incurred to replace the item or the house as it were new, keeping aside any kind of depreciation that occurred before the loss happened.
It is also suggested that a professional should be called to analyze the value of the home so that any special features of the house that might increase its value like customary architecture are highlighted. Also a proper and detailed record of the value of the possessions should be maintained.

Points to ponder

A few things to be taken care of while buying home insurance policy so that it can be useful in true sense.

Time period: It can be bought for a minimum of three years and maximum of 30 years. It needs to be renewed after that.

Suitability: the bank offering the home loan may encourage you to buy their home insurance product only but it is also better to choose a policy that suits your needs and budget.

Fine print: different Home insurance policies are worded in different ways. For example, structure insurance may mean only building and not land, or only jewelry kept in the locker might come under its scope.

Tenants: for those living on rent, you can only get the contents insured and not the building because you don’t own it.

These are just a few of the specifications. For the best results from a home insurance policy, the initial details need to be taken care of.

Lastly It is up to your discretion whether you pay a relatively smaller premium today, to any insurance company in exchange for a guarantee from the insurance company that it shall bear the burden of a large but uncertain loss in the future. After all our property or home is one of the major investments for life, sometimes even for generations..