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We take the trouble to install alarms, locks and fire extinguishers but we rarely consider investing in home insurance. It is seen that high networth individuals usually invest in home insurance where the risks are bigger. However, one fails to realise that there is always the risk of losing precious belongings to fires, floods, earthquakes, vandalism and storms, which is why home insurance is an important and necessary investment for all.Read more
Acquiring a home insurance plan is fairly easy, with a plethora of options available. There are a few factors you need to take into account before choosing which home insurance plan best suits your requirement. They are as follows:
1. Policies mainly cover your home and its valuables
A standard policy usually covers two main aspects – the structure, that is, your home and the content, those being your valuables and belongings. You should note that insurance policies cover your home for reconstruction costs and not for the market value of the house. The value of the reconstruction is calculated as per the built-up area and construction rate that is given by your insurer. This is to ensure that a fair cover is provided, should you need to claim insurance. The premium is also determined on the basis of location, as the cost of construction will differ, basis that.
When it comes to rented accommodation, you cannot insure a house taken on rent. You can however, insure your belongings. The sum assured for your belongings is usually calculated on the basis of their valuation. But in the case goods that have a value that depreciates with time, the sum assured will be determined after deducting the depreciation on the basis of the age of the item. You should make sure that you retain the bills of expensive purchases like a television or a refrigerator, so that it is easier to settle the claim at a later point. Note that policies do not cover stocks, bonds, cash or antique items.
There can also be claim limits depending on the type of item, and these limits differ from one insurer to another. You should ensure that you also consider the sub-limit on valuables, before settling for an insurance policy.
2. Upgrade the policy
Say you have bought an insurance policy, and thereafter, you have renovated your home. If you use expensive materials or flooring, you can choose to upgrade your policy, so that it reflects the actual value of your property and belongings. You can also extend the scope of the coverage if you feel like you need to include more components.
3. Select a plan considering all scenarios
Before purchasing a home insurance policy, you need to consider all possible outcomes you might be subjected to for which you would require cover. Furthermore, home insurance does not only compensate you for the money you can lose during an unfortunate calamity or accident. It can also compensate you for the repairing or renovating your home after the calamity. You should thus go for a specialized package and consider all the scenarios covered by it. You should also ensure that you take into account other factors like location so that if you live in a flood-prone area, for instance, your home insurance will safeguard you in the event of flooding during the monsoons. The premium paid in such cases, would be higher than the standard rate.
4. Determine the right coverage amount
While determining the policy coverage amount, you should take time to properly assess the value of your property and belongings. If the value of your property is under the sum assured, it is better than you being under-covered. If the coverage is low, the premium of course, would be low, but the purpose would not be served in the event that calamity strikes and the sum assured is less than the value of damaged property. You must also note that over-valuing your property might lead to complications at a later point, while claiming the amount.
Read More-: A Beginner’s Guide to Home Insurance
5. Identify the claim settlement ratio of the insurer
While opting for a home insurance policy, you should not be governed merely by the pricing. You should take into account, whether the insurer has a good claim settlement ratio as well. Conduct research on online forums and keep a look out for negative reviews or complaints by other customers. You should evaluate the kind of policies most people tend to go for, and take into account whether insurers provide premium discount rates as well.
6. Read the terms and conditions before signing
Often, we tend to get swayed by the many promises made by insurance agents and we opt for the insurance policy they recommend without reading it. Ensure that you read the fine print so that you can double-check the inclusions and exclusions. You should also ensure that your address is given properly in the insurance papers, and that the areas to be covered are mentioned in the policy. You should also make sure that only you or your family members fill up the form, only after you have carefully read it.
Though home insurance does not cover the wear and tear caused to your property due to the age of the building, it is still an important safeguard. Furthermore, if you’d like to get the best deal, it is recommended that you opt for a long-term policy like a 10 year policy as many discounts are provided upon renewal.