Handy Guide- All You Need to Know About Property Insurance

I do not think I need insurance. Do you think so? Who will invest in buying insurance? What is the need of buying insurance? These couple of thoughts or queries might come into your mind when you see any advertisement related to insurance or you hear people buying the insurance policy.

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**All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
*The premium of ₹ 9/month is for a pucca building with sum insured of ₹ 5 lakh at selected locations, for property age less than 40 years and policy term of 1 year. Additional premium is payable for the optional covers including contents opted.

Many of us underestimate the importance of insurance.

Believe it or Not!

Living a life without insurance is not a smart choice and you are always prone to risks, which may lead to unwanted financial expenses.

The role insurance plays usually goes undermined and living without taking insurance is one gamble, which is not appreciated.

Why do you wear a seatbelt while driving a car?

The simple answer is as it is a safety measure.

Likewise, having an insurance policy also secures you from different perils and provides coverage depending upon the situation.

Today, we have a plethora of insurance providers available in the market offering various types of insurance products and services.

One such insurance available in the market is property insurance.

Understanding Property Insurance

Whether you own a house or an office, it is your property and therefore it becomes important of not neglecting to buy property insurance.

Property insurance will protect all the goods and equipment present within the business premises or home against any loss/damage incurred due to robbery, theft, fire and ignition or any other perils.

Property insurance will provide you with complete coverage against all the perils mentioned in the policy document.

When we talk about property insurance, it includes several policies such as flood insurance, homeowners insurance, and so on.

When a claim arises under property insurance, the policyholder will either receive the actual value of the damage incurred or the price incurred to fix the problem.

Fundamentals of Property Insurance

There are generally three types of property insurance coverage, which are as follows:

  • The Replacement Cost: It generally covers the expense of any repairing or replacing the property at the equivalent value. The coverage is decided on the premise of replacement cost value and not on the cash value of the items.
  • Actual Cash Value: The actual cash value provides coverage wherein the owner or the renter is paid the replacement expense subtracting the depreciation. For instance, if the item destroyed were 05 years old then you would receive the value of the 05-year-old item itself and not of a new item.
  • Extended Replacement Cost: In case, if the cost of the construction has increased then the coverage paid will be more. In any case, it will not exceed the limit of 25%. While buying insurance, the limit is the maximum amount of advantage the insurance provider will pay under any occurrence or situation.

Why Buy Property Insurance

When buying property insurance, it is recommended to invest in buying comprehensive property insurance.

The following are some reasons, which make property insurance worth a buy:

  • A lot of business operates and functions around the use of various machinery. On the off chance, if the machinery gets damaged, lost, stolen or requires any sort of repairmen, having property insurance will take care of the incurred expenses and will compensate the amount mentioned in the policy schedule.
  • When we talk about property, it generally refers to stocks, machinery, buildings, furniture, and various types of equipment, fixtures and buildings. Having property insurance will shield the specified property against any act of burglary, fire-related perils and so on.
  • On a large scale, good or cargo are transported from one place to another via various modes of transportation such as air, rail, sea, etc. In case of any damage incurred to these goods while in transit it could lead to a huge financial loss and leave you in a state of stress and panic. Having property insurance will give a sense of satisfaction and peace of mind.
  • In case of any man-made calamity such as fire and ignition etc and natural calamity such as earthquake, floods, etc property insurance offers extensive coverage for any damage caused to the building, residence or shop.
  • Your business is of utmost importance as it provides you with a livelihood. In case of any unforeseen adversities, property insurance will take care from minor to major financial loss and not let your business standstill. 

How Does Property Insurance Work

Property insurance likewise secures against vandalism and robbery, covering the structure and its substance. Property insurance likewise gives liability inclusion on the off chance that somebody other than the property owner or leaseholder is harmed while on the property and chooses to sue.

Property insurance plans ordinarily bar damage that outcomes from an assortment of circumstances, including floods, drain and sewer reinforcements, leaking groundwater, standing water, and some different wellsprings of water.

The shape is generally not secured, nor is the damage from a seismic tremor. Besides, most property insurance will not cover outrageous conditions, for example, atomic/ nuclear events, an act of war or terrorism.

Factors Affecting Property Insurance Premium Rates

The following are some factors, which affect the property insurance premium rates, which are:

  1. Geographical location: The geographical location is one key factor and affects the insurance premium rate. Supposedly, if your property is insured at a location, which is nearby to the seashore that chances are that you are more prone to floods. In such a case, the insurance provider is likely to charge an extra premium amount.
  2. Size of the Business Premise: In case if you own a big factory or a large home, you the premium rate would increase. On the off chance, if own a single room set or a small shop then premium will be charged basis the equivalent.
  3. Safety Measures: The safety and security aspect also affects your insurance premium rate. In case, of any anti-theft installment in the building/home, if the company is located at a theft-prone area or if your business involves the use of any hazardous chemicals such factors do affect the insurance premium rate.
  4. Age of Building: Old buildings are more prone to any damage/loss, in such cases the premium charged would be high. For instance, if in a building a short circuit happens because of a fault in the wiring, which is old, the repairing done will be expensive because of which the insurers charge a higher premium rate.
  5. Type of Equipment: If the businesses involve the use of huge machinery and expensive equipment, the heavy premium is charged by the insurers. Besides, the age of the equipment also helps in determining and finalizing a premium amount. In case if your equipment is too, old and rarely available in the market then to repair the same a slightly higher premium amount will be charged. Moreover, if the equipment is used daily the chances are that it will be damaged frequently.
  6. Replacement Value vs Claim Post Deduction: The replacement value coverage means that the insurance provider would make a payout that will be enough to replace the damaged item with new equipment. Besides, the insurance provider may also make a payout subtracting the depreciation. Such policy plans cost less.

To Conclude

If you still have not bought property insurance, then go and buy now.

Understand the requirements and zero down the property insurance policy and secure your asset against any peril.

Do not think that buying property insurance is expensive rather think about the coverage it provides and if not bought, the expenses can easily create a hole in your pocket.

Consider the factors discussed-above as it does affect the property insurance premium rate.

Make an investment that will last a lifetime.

Written By: PolicyBazaar - Updated: 30 September 2021
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.