Having your home offers comfort, security, and stability in life. Insurers provide home insurance these days that help you build your dream house with financial protection in case of unforeseen events or emergencies like vandalism, accidents, fire, and much more.
It is highly recommended that you understand and analyse the dynamics of home insurance policy to choose the best one that meets your expectations.
Let us look at some of the commonly asked questions when buying home insurance.
Also read: Is Home Loan Protection insurance Tax Deductible?
7 Commonly Asked Questions Before Buying A Home Insurance
When you plan to buy home insurance, you can get confused because you have no proper knowledge and experience. Let us look at some of the frequently asked questions before buying a home insurance:
1. What Are the Different Types of Home Insurance?
In the insurance market in India, homeowners insurance or home insurance is of various types that govern and provide safety and security for unforeseen events as per the coverage of the belongings and the policy plan you have opted for.
Let us delve into various types of homeowners insurance plans in India:
- Fire Insurance: A fire insurance plan protects your belongings and structure against fire, accidents, and various natural calamities that might deteriorate your home's structure over time.
- Insurance for Your Home Structure: This insurance plan protects your home against vandalism, accidents, and more. It covers the belongings of your home's interior and exterior parts, such as the roof, kitchen, bathroom, and various structural fittings.
- Theft Insurance: Theft is the most important and necessary insurance that covers your valuable personal or home belongings against theft. This insurance safeguards your finances and covers all your belongings at a good premium rate.
- Public Liability Coverage: Public liability coverage insurance protects your home from the damages caused by third parties or any guests in your home. This insurance plan protects your home from additional costs incurred against the repair, maintenance, and other factors.
- Burglary Insurance: Burglary Insurance covers your home against various burglary risks, theft, or attempted burglary into your house.
2. Why Is Home Insurance Necessary?
Buying a home insurance plan ensures your home is well protected from unforeseen events. You never know what might happen in the future and how much of a burden it will put on your finances to rebuild, renovate, and much more.
If you acquired your home through a mortgage, as it has been seen, various insurers tend to lend you money just to have a stake in your home.
3. What Is Home Loan Insurance?
Home loan insurance, also called a Home Loan Protection Plan (HLPP), safeguards your finances and ensures that if the borrower is dead, their home loan is taken care of. Thus, insurers are liable to pay the outstanding balance in the case of the borrower's death.
Home loan insurance applies only to existing home loans and shouldn't be confused with a home insurance policy. One difference is that home loan insurance impacts and reduces the down payment, whereas home insurance has no effect on it.
Also read: Do we need to buy Home loan insurance if already having a term insurance?
4. What Is Liability Coverage in a Home Insurance Plan?
Liability coverage refers to coverage for damages incurred by third parties and guests in a standard home insurance policy. However, it is also important to know that you could be held liable if your child or your guest damages your neighbour's property.
5. How Are the Coverage Limits Calculated for Home Insurance?
The insurer uses a formula to calculate the coverage limit for your home. To calculate its value, you can multiply the built-up area of your property by the total cost incurred during the construction of your home per square foot as of the date the policy is issued or purchased.
It is highly recommended that you consider various factors and the cost of your belongings, which include:
- The cost of your personal belongings
- The asset you hold in your home
- Liability to the third party or others
- Various other expenses
The Insurance Regulatory and Development Authority of India prescribes two methods for calculating a property's value.
Market Value (MV)
Under this method of market value, a mishap caused by various events like loss and depreciation is calculated based on the age and value of an asset. The policyholder under this insurance plan does not pay enough to replace their damaged property.
Reinstatement Value(RIV)
Reinstatement Value (RIV) is calculated based on the cost that might be incurred on the replacement of the ceiling under S.I. The best part of the Reinstatement Value(RIV) is that no depreciation is levied, but the damaged asset must be repaired timely to claim the insurance.
6. What is the Deductible Amount and What are Its Types?
A deductible is the amount you are liable to pay in case of any energy or unforeseen events before your insurance company starts to pay for your losses and repairs after the claim settlement is approved. The higher the deductible amount, the lower your premium.
Following are the types of deductibles that are offered in a home insurance policy:
Compulsory Deductible
It's the amount prescribed by the Insurance Regulatory and Development Authority of India (IRDAI), in which a policyholder is liable to pay a sum before the insurance company starts to pay. In contrast, the type and coverage of the policy don't matter.
Voluntary Deductibles
A Voluntary Deductible offers an insurance company the leverage to choose whether they want to pay for the cost of the damages to the property incurred by the policyholders, in addition to the Compulsory Deductible. It must be kept in mind that the higher the Voluntary Deductibles will be, the lower the premium amount it can offer.
7. What Factors Make a Homeowner Eligible for Discounts?
Buying an insurance policy from the same insurer for some time for other belongings and the home insurance policy can provide you with discounts and savings of up to 5% to 15%.
Various factors are considered by the insurer while allowing you hefty discounts or savings when purchasing a property insurance:
The Structural Condition of Your Home
An insurance company considers the age and condition of your home when issuing you a home insurance policy. An older and poorly conditioned property attracts higher insurance premiums from the insurer, while a newer and better-conditioned one attracts lower premiums.
Location of Your Property
Your property's geographical location is essential, as it can influence the premiums and coverage that best suit your home insurance requirements.
Distance From The Fire Station
Insurance companies generally use this method to determine the cost of your home insurance based on the distance of the fire stations from your property. The shorter the distance, the sooner a fire can be put out, and vice versa.
As per the rules and time set by the Insurance Regulatory and Development Authority of India (IRDAI), the claim settlement process must be processed within 30 days of raising the claim. However, most insurance companies settle claims within 10 days of the claim.
A home insurance policy offers you financial backing and peace of mind, especially when your home is hit by a sudden act of calamity, accident, vandalism, fire, and much more. It is highly recommended that you consider the factors above while purchasing a home insurance policy plan that matches your requirements and adheres to the norms of the Insurance Regulatory and Development Authority of India (IRDAI).
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