How Much Home Insurance Do You Need?

Inquiries for home insurance policies are on a rise over the past few weeks, on various online platforms including Policybazaar. Homeowners these days want to know the scope of coverage provided in a home insurance policy. With frequent news of natural disasters coming in light, experts suggest that it is imperative to buy home insurance cover for individuals given the large sums of money involved in buying a house.

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The incidences of natural disasters have increased sharply in India in the past 10 years, and the losses from the natural calamities are said to have crossed a billion dollar mark. As per the recent World Bank estimate, nearly 600 or one-third of India’s districts are hazard-prone, putting at risk the lives of people and properties worth millions.

As per the National Disaster Management Authority of India, 60% of the Indian landmass is prone to earthquakes and 8% is susceptible to cyclones, despite the fact, home insurance usually remains an under-selling product because the awareness among the people is quite low in comparison to other insurance products in the market. As per a survey in 2019, only 30% of people had bought home insurance cover, and 70% found it to be imperative. But recently the interest in home insurance products has considerably picked up; inquiries on our platform have also been doubled. 

However, choosing the right insurance product with an adequate coverage amount can be a little confusing. A few insurers now offer an all-risk policy for home insurance on the registered value of the house, including the cost of land. This is useful in cases of total loss where the home is destroyed and unrepairable. The sum insured in this case is large and will allow you to buy a replacement home.

What Does Home Insurance Cover?

A home insurance policy offers protection against the loss or damage caused to the house and its assets. Some insurers also offer a comprehensive home insurance policy that protects your home in case of fire, terrorism, and natural calamities like an earthquake, floods, storms, etc. 

A home insurance policy includes two basic features coverage for the building and its content like furniture, electronics, jewelry, durables, clothes, utensils etc. If you buy a policy covering only the infrastructure then it will pay for the reconstruction of the building structure in case of complete destruction. Damages caused by natural calamities, fire, Aircraft Damage, and explosion are recompensed.  And if you buy coverage for personal belongings in your house then the insurer will pay for the loss or damage caused to items/assets in your house due to theft, burglary, fire etc. If you are planning to buy one it makes sense to buy it when you buy the house. As some insurers may not offer cover if the house is more than 30 years old.  

If you live in a rented house then you can buy insurance for the contents of your house. And if you have your own house you can opt for a home insurance package policy that covers the building and the contents in the insured building. Some insurers also provide alternate accommodation cover. Not only this, destruction due to a terrorist attack is also covered by some insurers. Therefore, buying a home insurance policy is a step towards protecting your wealth, and should be a part of your finances.

How much Home Insurance Cover Do You Need?

If you own a flat in a building, then also it makes sense to buy an individual home insurance plan because the insurance cover that your society provides will only offer coverage benefits limited to the building structure and not the belongings in your house.  It would be best to opt for a variant that offers ‘agreed value’. Independent house owners can opt for the variant that pays for the construction of the property as well. 

To determine how much coverage amount you would need or the Sum assured amount that you should opt for depends on the structure, area, construction, and belongings in your house. Here is a simple formula that the insurers follow to assess the value of your property structure and its belongings. 

Sum insured for the property structure = Built-up area x cost of construction per square foot (as on the date of policy purchase)

For instance, if the area of your property is 1000 square feet and the rate of construction decided by the insurance company is Rs 500 per square feet, then the coverage amount or sum insured for your property structure will be Rs 15 Lakh. 

Sum assured for the content in the house is to be determined based on the Actual Cash Value (ACV) of the asset or the Current Market Value minus the Depreciation for the usage. 

You can easily get insurance for your home online or renew it online without the need for physical inspection unless someone is opting for a higher sum assured or a specific package. 

Long Story Short

Whether you live in a rented apartment or have your property you can consider buying a home insurance policy and protect your house from unforeseen natural and man-made calamities. Even societies can get house insurance cover for the property structures. Buying the right type of home insurance would ensure protection to your house against the numerous risks that it is susceptible to.

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.