THE BLOG

5 Things Everyone Should Know About Home Insurance

25/04/2016 8:21 AM IST | Updated 15/07/2016 8:26 AM IST
NEW! HIGHLIGHT AND SHARE
Highlight text to share via Facebook and Twitter
Dimitri Otis via Getty Images
Toy wooden miniature houses, one under glass dome

Investing in a home is a big financial choice and also an emotional experience for most people, who might own either one or a maximum of two properties in a lifetime. This is enough reason to highlight the significance of buying a good home insurance policy. After all, expensive things need extra protection.

Fortunately, home insurance is quite affordable and should be thought of as a type of maintenance cost. You don't mind paying a maid to clean the house but when it comes to buying home insurance, why there is so much resistance? Invest in a good home insurance plan and let nothing touch it--not even Acts Of God!

[C]omprehensive home insurance wins hands down in terms of popularity for it covers almost every eventuality, ranging from a fire to an earthquake to burglary.

Another positive factor is that buying home insurance is simpler than other types of insurance such as child or retirement plans. Here are a few pointers that will guide you in the right direction.

Decide what to insure

Will you insure just the land and the structure, or also the contents of the home? These days you get highly customized home insurance plans wherein you can get add-ons to suit your individual needs. If you live in an area with a high crime rate, then insuring the contents of the house (especially valuables like jewellery) with theft insurance makes more sense. However, comprehensive home insurance wins hands down in terms of popularity for it covers almost every eventuality, ranging from a fire to an earthquake to burglary.

Don't fall into the trap of underinsurance

When you think that a particular expense isn't important and consider it as a mere necessary evil, then deployed are ways to save money by hook or by crook. People tend to knowingly undervalue the cost of property and save on premium cost. Yay! It serves the purpose in the short term but defeats the whole idea of having home insurance in the long run.

If something goes wrong in the future and you need the money to restore your house, you'll get peanuts because you underinsured your property.

If something goes wrong in the future and you need the money to restore your house, you'll get mere peanuts because you made the mistake of underinsuring your property. In fact, in such a case, even lower claims are paid, which is in proportion to underinsurance. For example, if the structure/contents are underinsured by 20%, the claim paid will also be 20% less than the actual claim amount.

For people who are thinking of underinsuring I would suggest that you don't get home insurance at all. Either way, a major chunk of money will be paid out of your pocket. Don't buy home insurance just for the heck of it. I'd like to once again strongly emphasize that correct valuation of the property and its contents is of utmost importance to optimize the benefits of home insurance.

Compare and then buy

Intense competition between insurance companies is a boon for buyers. Insurance companies these days are trying to grab buyers' attention by offering lucrative plans with lots of inclusions at a competitive price. You must check and compare online before making the final choice of plan so that you don't miss out on a good deal. Why pay more for the same set of inclusions?

Does your friend pay a lower premium than you for higher sum assured when you both have property valued at ₹50 lakh? Don't fret or blame your agent.

Understand how premium is computed

Does your friend pay a lower premium than you for higher sum assured when you both have property valued at ₹50 lakh? Don't fret or blame your agent. This happens quite often. The truth is that there are a lot of factors that decide premium apart from just the valuation of house. If your house falls in a seismic (earthquake-prone) zone then you need to cough up a higher premium. Similarly, factors like locality, structural strength, floor of your house (in case of a multi-storey building), type of city ( cities are graded in terms of living expenses; for example, like Delhi falls in the 'A' class) also matter. Compute these factors to reach the correct valuation and thus the premium for your house insurance.

Think long term

Surely, your home won't be yours for only one or two years. So, it becomes cost-effective if you buy a long-term plan, say a 20-year plan, in one go. This will not only save you from the hassle of renewing every now and then but will also reduce the premium cost. The savings can be as much as 50%. Not bad, right? Once again, evaluate multiple options carefully before buying.

A home is a precious investment, and insuring it is a fool-proof way of keeping it secure for the years to come. No one knows what the future holds, but we can at least be assured that we will have the tools to overcome even serious setbacks. Invest in a good home insurance plan and reduce the uncertainties of future.

Like Us On Facebook |
Follow Us On Twitter |
Contact HuffPost India

Also see on HuffPost:

7 Apps and Devices For Women’s Safety

More On This Topic