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Your home is a prized possession. Can you imagine the loss if your house is destroyed in a fire or a flood. What if the costly contents of your house are destroyed?

What is home insurance?

The Insurer bears the risk of damage and destruction to the structure of your house and compensates you for this loss. You have to pay a premium for this benefit. Based on the premium you pay the structure of your house is insured for an amount called sum assured.

You can also insure the contents of your house with home content insurance under a householder's package policy.

If you stay in a rented house you can avail only home content insurance and not home insurance for the structure.

Why buy Home Insurance?

Protects your Structure

Helps pay for the replacement of the structure of your home, if damaged in a natural or manmade calamity.

 

Protects your Contents

A householder's package policy, compensates you against damage and loss of the contents of your home.

 

It is Very Cheap.

It can be very costly to repair the damage to the structure of your home. The premiums on home insurance are a pittance compared to this loss.

Special Benefits

You can avail special cover for jewelry and precious items in your home. Alternate accommodation if your home is under repair.

Eligibility for Home Insurance

Any resident Indian who is the owner and / or occupant of the property can purchase a Home Insurance Policy.

Key factors to consider for Home Insurance

Take a basic fire and allied perils insurance policy

This policy replaces the structure of your home if destroyed by :

  • Fire

  • Flood

  • Storm and Cyclone

  • Lightening

  • Hit by an aircraft

  • Damaged in an explosion

  • Deliberately set on fire (arson and malicious intent).

Householder's package policy

A much better home insurance policy for you is a householder's package policy. You have to pay a higher premium than a fire and allied perils policy. You are covered for damages suffered to the structure of your home by fire and allied perils.

You are also provided a cover for the contents of your home (Furniture ,electronic items, jewelry, art) destroyed by a fire and allied perils , theft or burglary and mechanical and electrical breakdowns.

How does a home insurance policy pay you for damages?

You live in a posh area in a metro city. You have availed a comprehensive home insurance policy popularly called HPP (Householder's Package Policy).Unfortunately due to a flood the wall of your house is severely damaged. So how does the insurer compensate you for the loss?

In a home insurance policy you are compensated only for the repair/reconstruction of the structure of your house.

The Insurer is not concerned with the location of your home. It can be in a posh area or a cheaper area. The Insurer considers the cost of replacing the structure of your house and is not concerned with the location of your home.

How does the Insurer calculate the value of your house?

The Insurer calculates the cost of the damaged structure of your home on the market value basis. The market value basis is the actual cost of the structure of your house (say the cost of the wall of your house) damaged in the flood. The Insurer accounts for depreciation (wear and tear of the wall with age).
You are given the difference of the cost of the asset (wall of the house) minus depreciation (determined at a fixed value).

How is your claim settled in home content insurance?

Costly electronic gadgets of your house or furniture are destroyed in a fire /short circuit. Are you given a new electronic gadget or furniture set to replace your loss?
NoThe value of the asset (Furniture or the electronic gadget) is given to you after accounting for depreciation.

Types

Standard Fire and Allied Perils Insurance: This insurance covers most kind of damage caused to the house due to a fire, riot, floods or even a storm.

Burglary and House breaking insurance policy: Covers loss of assets due to a burglary.

 

Concepts & FAQ's Home Insurance

What is Home Insurance?

Home insurance covers certain types of damage to Property and its contents, theft of personal possessions, and liability in case of lawsuits based on incidents or events that occur on the property.
This is the most important form of insurance after life insurance because people generally make their biggest investment in their homes. It is not just about money but also about emotional attachment to the property. Home insurance policies differ substantially from contract to contract and from insurer to insurer as well as from region to region.

What are the losses that are not covered under house insurance?

Almost all policies have exclusions, which are causes of loss that are not covered that are spelled out in the terms and conditions. Home insurance does not cover damages to properties due to natural wear and tear. Policies will also specify specific exclusions such as earth movement, water damage, power failure, neglect, war, nuclear hazard or intentional loss.

Normally home insurance does not cover damages caused due to terrorist attacks. One needs to buy separate policies to cover these damages.

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Frequently Asked Questions

What are the eligibility criteria to avail a Home Insurance policy?

Any resident Indian who is the owner and / or occupant of the property can purchase a home insurance policy.

What are the documents required for filing a claim?

Documents required for filing a claim are:- Claim Form of the company duly completed and signed. Other evidence of event occurring, nature and extent of loss such as:- - First Information Report - Fire Brigade Report - Estimate of the repairers - Rent Agreement - Transport details for baggage loss

I live on rent, why would I require insurance?

There is an option to cover your Contents. The home Insurance policy covers your household appliances, jewelery, furniture & fixtures, personal items at your home against fire and allied perils like earthquake, terrorism and burglary.

If I take additional safety precautions like fire extinguishers, smoke alarms, sprinklers etc. will it reduce my premium amount?

Installing fire-extinguishing apparatus does not lower premium in case of Home Insurance.

If I have a home insurance policy with two different companies will I be benefited from both?

If you have a policy with two insurance companies, at the time of a claim both the insurance companies will pay on proportionate basis.

If I use my Home for business purposes, can I insure it?

No, Home used for business purposes are not covered.

If we friends share a home, can we go for Home Insurance?

Yes, each one of you can buy a separate Home Insurance Policy for your part of asset.

What is Replacement/Reinstatement value?

It is the approximate cost that would be required to reconstruct the Property (after damage or destruction), to its present form. As per Standard Procedure, the Reconstruction cost includes the value of plinth and foundation. It does not include the value of the land.

Is the sum insured calculated differently for structure of home & its contents?

Yes, the sum insured is calculated differently for the structure & for its contents, Sum Insured for the structure is calculated based on the Reconstruction value. Whereas the contents of your home such as furniture, durables, clothes, utensils, jewelry, etc. - are to be valued on market value basis i.e. the current market value of similar items after depreciation. Depreciation does not apply for jewelry.

What do you mean by Alternative Accommodation?

Alternative Accommodation is an optional cover to the policy. If you are forced to shift to an alternative accommodation because your home is destroyed by an insured peril, then you will also be covered against the additional rent. To know more on Home Insurance and the various riders available, call us on 080 67974000

What are the requirements to purchase a property insurance policy?

The proposer of the policy should first and foremost have an interest in the assets being proposed for insurance, i.e. he/she should stand to lose financially in the event of loss or damage to such assets. Secondly, the proposer should submit a proposal form (which can be obtained at any insurer's website or office). The proposal form should disclose all details, which are true to the insured's best knowledge and other information, which the proposer may feel is relevant.

What are the different types of Property Insurance Policies?

The most popular is the Standard Fire & Allied Perils policy which covers most of the perils the property is exposed to like fire, riots, flood, and storm. Loss of current assests due to burglary and theft can be covered under a Burglary & House Breaking Insurance Policy. Valuables can be covered under All Risks Policies and there are package policies for house owners and shopkeepers.

How does one fix the sum insured?

Generally, there are two methods. One is Market Value (MV) and the other is Reinstatement Value (RIV). In the case of M.V, in the event of a loss, depreciation is levied on the asset depending on its age. Under this method, the insured is not paid amount sufficient to buy the replacement. In the RIV method, the Insurance Co. will pay the cost of replacement subject to ceiling of S.I. Under this method, no depreciation is levied. One condition is that the damaged asset should be repaired / replaced in order to get the claim. It may be noted that RIV method is allowed only for FIXED ASSETS and not for other assets like stocks and stocks in process.

What will be the cost of a fire insurance policy?

The cost of a fire insurance policy or the Premium can depend on the

  • Perils to be covered

  • The value of the items covered

  • The usage of the premises proposed for insurance.

  • The location details of the premises proposed for insurance etc.

  • The construction of building and occupancy Consequent to de-tariffing of the non-life insurance segment (except Motor Third Party Insurance where premium rates laid down by IRDA), premium rates charged by each insurer may differ. However, they should have been filed with the IRDA under File & Use procedure.

How does one arrive at the value of assets in Dwellings or Offices or Industries?

Other than dwellings, industrial units or offices will maintain books of accounts showing therein value of assets, therefore it will not be any problem in arriving at the sum insured. In case of dwellings, one should take stock of assets under broad categories like furniture & fixtures, clothing, bed linen, kitchen equipment, electronic gadgets and arrive at the sum insured.

Why should I insure my Building? Fire can't possibly do any harm to the building.

Fire and other perils (normally covered under a fire insurance policy) can cause loss / damage to buildings. There have been fire accidents that have completely destroyed multi-storey buildings. Floods can also bring about devastating losses. Similarly, Riots and Acts of Terrorism can also produce huge losses to human lives as well as property.

Can I ask for cancellation of policy mid-term? Will I get any premium refund?

Yes, At Insured's option: Retention of premium on short period scale and balance if any, will be refunded. At Insurer's option: Pro-rata refund of premium will be given.

In case of loss, what are the obligations of the insured?

Every insured is expected to behave as though he is uninsured. Take all precautions to prevent / aggravate the loss. Inform Insurance Company who have to be given an opportunity to inspect the damages. Inform fire brigade who will assist to put out the fire. During fire fighting, any damage caused to other insured property caused by water, will be paid by Insurance Company. Extend cooperation to surveyor while inspecting and assessing the loss. If arrival of surveyor is likely to be delayed, then, take photos / and shift unaffected assets to a place of safety. Give completed claim form and documents as required by Insurer, in support of your claim. After repairs / replacement, submit bills to Insurer.

If I insure for a higher value, will I get a higher claim amount?

No. When you apply for a fire insurance policy, the current market value of the property or the Reinstatement value of the property, depending upon the basis of the Sum Insured, should be accurately calculated for arriving at the correct amount to be insured. The compensation payable when a covered loss or damage occurs shall be based on whether or not the property has been insured adequately. If the amount insured is excessive, it will mean overpayment of unnecessary premium; if the amount insured is inadequate you will receive amounts in proportion to the market value only.

Can items like jewellery, ornaments and art works be covered by the general fire insurance policy?

Unless prior consent has been given by the Insurer, general fire insurance policy does not cover items like jewellery ornaments, art works, scripts, documentary information, computer system information, shares and stocks, cash. These can be covered on specific request and subject to valuation where necessary.

I have taken an insurance policy covering my building. My bank which has financed my business has also taken insurance separately. Both policies are in force covering same property. What happens in the event of a claim?

In the event of a claim, each insurer will pay the loss amount in proportion to the Sum Insured under their respective policies, in accordance with the principle of contribution. The object of the principle of indemnity is to place the insured in the same place as he occupied prior to occurrence. Insured is prevented from making claim for full amount of loss under each policy. Insurance company indemnifies the insured only to the extent of actual loss suffered subject to depreciation, policy excess etc., and not permit to make profit out of a loss.

What is the relevance of salvage?

In case of claims under various types of insurance policies, the partly damaged goods or the wreck of a car or any machinery or any other property settled on Total Loss Basis is known as "Salvage". After settling the claim for the full amount the salvage becomes the property of insurance company. Generally the job of salvage disposal is entrusted by the insurance company to the surveyor who carried out the loss assessment, subject to observance of procedure for salvage disposal. The amount realized through salvage disposal will be set off by insurer against losses paid by them.

I want to cover my goods against transit risk. What policy do I take?

The Marine Cargo policy offers cover for goods against transit risks. You can take this policy if you are, for instance, transporting your household goods from one place to another. You may either opt for a 'Basic Cover' or for an 'All Risks' one. The latter offers a wider scope of coverage. Please read the terms and conditions of the policy to understand what you are buying.

Who has to arrange for Marine Cargo insurance-the buyer or the seller? Or do both need some protection?

This depends on the Sale Contract the two enter into. For each Sale Term such as Free on Board (FOB), Cost and Freight (C&F), Cost Insurance and Freight (CIF) etc, the responsibility for arranging for insurance varies.

I need to cover my jewellery. What policy should I take?

Insurers offer 'All Risks' policy for covering jewellery. You must ensure that your jewellery is valued correctly and you are able to show proof of valuation should a claim occur. An All Risks policy also has exclusions, so go through the terms and conditions thoroughly.

I want to cover my household goods against burglary when I am away. Can I get a burglary insurance policy?

A burglary insurance policy covers goods against the risk of burglary. A burglary insurance policy may also offer extension of cover against theft. A burglary insurance policy will usually cease to operate if the house is not occupied beyond a certain defined period unless you have intimated the insurance company and they specifically agree to extend the cover even when the house is not occupied. It's a good idea to ensure that you have a burglary policy always rather than opting for one only when you are away. You might not get one if you want to insure the contents only when the house is locked.

 

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