In our last article we tried to give you more information about Property Insurance such as Fire Insurance and Auto Insurance. In this article we will discuss you clearly about other property insurances such as Home Insurance, Earthquake Insurance and Tittle Insurance.
, also commonly called hazard insurance or homeowners insurance (HOI), is the type of property insurance that covers private homes, it is an insurance policy that combines various personal insurance protections, which can include losses occurring to one's home, its contents, loss of its use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may occur at the home. It needs that at least one of the named insured occupies the home. The dwelling policy (DP) is similar, but used for residences which don't qualify for a variety of reasons, such as vacancy/non-occupancy, seasonal/secondary residence, or age. It is a multiple line insurance, meaning that it includes both property and liability coverage, with an indivisible premium, meaning that a single premium is paid for every risks.
The home insurance policy is generally a term contract a contract that is in effect for a fixed period of time. The payment the insured makes to the insurer is called the premium; the insured must pay the insurer the premium each term. Most insurers charge a lesser premium if it appears less likely the home will be damaged or destroyed: for instance, if the house is located next to a fire station, if the house is equipped with fire sprinklers and fire alarms.
Types of Home Insurance
Home insurance in India has a key role to play in the protection of insured’s house or building structure and valuable possessions or building content. Home insurance policy is an assurance provided by the insurance company that combines insurance on the home, its contents the personal possessions of the home owner, as well as insurance covering accidents that may take place at the house like fire and natural calamities; the coverage of the risk however depends on the type of policy. There are mainly two types of home insurance in India;
a. Building insurance
b. Content insurance
a. Buildings Insurance
Buildings insurance is an essential part of property investments. The compulsory obligation made by the housing finance companies has strengthened the need for insurance in combination with property investments. Insuring the building or building structure is important since it protects insured against inevitable losses in case insurers building is destructed and debilitated in any natural or man-made calamities. The housing finance companies are insisting on building insurance so that in the event of a disaster it can be repaired or rebuilt, as lenders don't want to be left without security for their loan, a home insurance policy should cover expenses to rebuild insurers home in the event of it being fully destroyed or damaged to the point that complete rebuilding is necessary (in eventualities like earthquake, fire etc).
Different home insurance companies have different specifications for policy coverage; Home insurance companies in India generally have home insurance plans that insure the building structure of insured’s’ home for its reconstruction value. This is the cost incurred to reconstruct the home if it is damaged and not for its market value such as the value of land etc. Sum insured is calculated by multiplying the built up area of insurers home with the construction rate per sq. feet.
Home insurance plan for buildings are generally meted out on conditions as per the policy terms arising out of conditions like;
- Fire, Lightening, explosion of gas in domestic appliances
- Bursting and overflowing of water tanks, apparatus or pipes.
- Riot, Strike, Malicious or Terrorist Act
- Flood, Inundation, Storm, Typhoon, Hurricane, Tornado or Cyclone
- Damage due to earthquake, subsidence and Landslide (including Rockslide).
- Damage caused by Aircraft & Impact damage
- Third party liability and personal accident.
b. Content Insurance
Content insurance may be considered optional but with the threat of burglaries, natural disasters and fire, content insurance covers are rising in demand, contents insurance for home insurance plans includes protection to movable goods, possessions or contents in the house; anything that is not a fixed parts of insured’s home, for example insured’s appliances, electronic goods, furniture and clothing.
Similarly as the modalities adopted in building insurance, different home insurance companies in India have different policies for content insurance, most of the companies comply with insurance plans where a value equal to the market value of household contents i.e. the value for which this used item could be bought or sold in the market is covered as insurance.
The insured amount given against the perils for building or structure and its contents is estimated either on 'reinstatement value' basis (which is the value for replacing the item with a new item of same type and make) or on 'market value' basis (which is the reinstatement value less depreciation depending on the age of the item).
Protection under Content Insurance
Content insurance offers protection against various perils including:
- Theft and vandalism
- Valuables such as jewellery, cameras and watches against all risks,
- Cover against all kinds of accidental breakage of plate glass fixed in doors and window frames.
- Loss/damage to domestic appliances due to electrical and mechanical breakdown.
Home insurance can be availed for both building and content combined, but, most home insurance plans in India excludes underinsurance of the property value, willful destruction of property, loss, damage or destruction caused by war perils, wear and tear and atmospheric conditions etc, damage due to an act of terrorism (unless specifically covered) and losses or damages incurred when premises are unoccupied beyond 60 consecutive days.
The losses or perils covered under this policy
- Explosion of gas cylinder
- Spread of Fire due to short-circuit
- Riot, Strike, Malicious damage
- Aircraft laws
- Impact from rail/ road vehicles
- Storm, Cyclone, Flood
- Instant Coverage
- No Documentation
- Simple and easy claims process
- Long term discounts from 15% to 50% based on the tenure
- Coverage against earthquake
- Architect’s/ Consulting Engineer’s fees are also cove
Home loan eligibility
for Resident Indians depends upon the repayment ability of the loan applicant, the maximum loan that can be sanctioned differ with the banks and other housing finance companies (HFC) and usually, the maximum loan amount granted is 80 to 85% of the cost of insures home. Home loan eligibility corresponding to repayment option is based on the following factors, even if, the eligibility criteria may vary according to the HFCs regulations.
Home loan Eligibility Criteria
- Age (Minimum) 21 Years
- Age (Maximum) 58(salaried)
- Age 60(Public limited/Government Employees)
- Age 65 (self employed)
- Should be a Graduate
- Stable source of income and saving history
- Number of dependents, assets, liabilities
- Other income sources like Spouse's income
Importance of Home Insurance
Home Insurance has advanced as one of the most enterprising sectors in the real estate scenario in India, as more and more investments are made in the real estate sector, there has been a rising demand for home finance and home insurance simultaneously. The significance of home insurance in the protection of insurers’ house and valuable possessions is as importance as protecting insures family from any hazards that act as threat to life and property.
The policy provided by the home insurance companies act as a guarantee that combines insurance of the home, its contents the personal possessions of the homeowner, risk attached to burglary; as well as liability insurance for accidents that may occur at the house like fire and natural calamities, the amount of the risk covered however depends on the type and content of the policy. A usually configured home insurance policy regularly covers calamities in two categories - natural and man-made.
Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property, most ordinary home owners’ insurance policies do not cover earthquake loss. Most earthquake insurance policies feature a high deductible, which makes this type of insurance helpful if the entire home is destroyed, but not helpful if the home is merely damaged. Rates depend on location and the probability of an earthquake, rates may be cheaper for homes made of wood, which withstand earthquakes better than homes made of brick. If the relatives/family members can create their identity and bona fides, it may just make things that much easier for insurance companies to settle claims. What happens generally in the after effects of natural disasters is that survivors/inheritors, overcome with grief and shock, find it difficult to harness their memory, little realizing that those seemingly trivial pieces of paper and bland e-mails can go a long way in securing a safe future.
Tips for Buying Earthquake Insurance
1. If person live in a quake-prone region and they can afford it, the best way to protect their investment in your home is to retrofit and buy earthquake insurance.
2. The decision whether or not to buy EQ insurance is an individual, financial decision, Key factors to research and consider are:
- The financial strength of the companies,
- The features and pricing of their policies,
- The amount of equity people have in their home,
- The age and style of construction of their home and foundation.
3. If people decide to buy EQ insurance, shop for limits that are adequate to fully replace their property, engineering costs, required development to comply with building codes, temporary living expenses, outbuildings, etc
4. Policies with 10% as opposed to the standard 15% deductible are now available but of course they're more costly, the price and high deductibles for EQ policies have led many people to avoid buying the product, but people should remember that; If they live in a quake-prone region, going "bare" with no insurance means they have a 100% deductible -they'll bear the entire risk themselves.
Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses connected to the property’s title or ownership. Before people purchase their home, it may have gone through several ownership changes, and the land on which it stands went through many more. There may be a weak link at any point in that chain that could emerge to cause trouble, for instance, someone along the way may have forged a signature in transferring title. Or there may be not paid real estate taxes or other liens. Title insurance covers the insured party for any claims and legal fees that occur out of such problems. The required insurance protects the lender up to the amount of the mortgage, but it doesn’t protect equity in the property, for that person who takes an insurance need an owner’s title policy for the full value of the home. In numerous areas, sellers pay for owner policies as part of their obligation to deliver good title to the buyer, in other areas, borrowers must buy it as an add-on to the lender policy. It is advisable to do this because the extra cost above the cost of the lender policy is relatively small.
The owner’s protection lasts as long as the owner or any heirs have an interest in or any obligation with regard to the property, when they sell, however, the lender will require the purchaser to acquire a new policy. That protects the lender against any liens or other claims against the property that may have arisen since the date of the earlier policy.
Types of Title Insurance
There are two main types of title insurance policies:
- Owner’s policy
- Lender’s policy
This protects the property owner from various title-related losses that are listed in the insurance policy, for as long as the property is owned, an owner’s policy sets a maximum amount of coverage.
This protects the lender from losses in the event that the property’s mortgage is invalid or unenforceable; a lender’s policy generally provides coverage for the amount of the property’s mortgage. People can buy title insurance for both residential and commercial properties.
Types of residential Title insurance include:
- Policies for new homeowners
- Policies for existing homeowners
- Policies for lenders in a residential mortgage
Residential Title insurance policies can insure:
- rental units
- vacant land
- leased properties
- rural properties
Types of commercial title insurance include:
- Policies for individuals purchasing commercial properties
- Policies for lenders in a commercial mortgage
Commercial Title insurance policies can insure:
- office buildings
- industrial buildings
- shopping centres
- apartment buildings
- rental units
- vacant commercial land
- leased commercial properties
Title Insurance Cover
Title insurance policy may provide protection from such losses as:
- Unknown title defects (title issues that prevent you from having clear
- ownership of the property);
- Existing liens against the property’s title (e.g. the previous owner had
- unpaid debts from utilities, mortgages, property taxes or condominium
- charges secured against the property);
- Encroachment issues (e.g. a structure on your property needs to be
- removed because it is on your neighbors’ property);
- Title fraud;
- Errors in surveys and public records; and
- Other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future.
Title insurance policy will protect insured as long as he or she own their property, and will cover losses up to the maximum coverage set out in the policy, it may also cover most legal expenses related to restoring their property’s title.
Exclusions under Title Insurance:
When purchasing title insurance, it is important to read the policy and ask questions to be aware of the coverage that is provided, people also need to be aware of possible exclusions, which may include:
- Known title defects (that were revealed to you before you purchased your property);
- Environmental hazards (e.g. soil contamination);
- Native land claims;
- Problems that would only be discovered by a new survey or inspection of your property (e.g. the property is smaller than originally thought);
- Matters that are not listed in public records (e.g. unrecorded liens and encroachments); and
- Zoning bylaw violations from changes, renovations or additions to
Title insurance does not provide damages for non-title related issues. It is not a home warranty or home insurance policy, and will not provide damages for:
- Damages due to flooding, fire or sewer backup;
- General wear and tear of your home (e.g. replacing old windows, a leaky roof, or an old furnace);
- Theft (e.g. a burglar breaks into your home and steals your television); and
- Other losses or damages due to non-title related issues.
In this article we have tried to explain about Home Insurance, Earthquake Insurance and Tittle Insurance. We believe that this article helped you in making a clear understanding about Property insurance. For further queries feel free to contact IndianMoney.com