On the house

Insuring your home and its valuables is as essential as buying cover for your life. However, go only for the sections that meet your specific requirements.

Print Edition: March 5, 2009

Building a house is never easy and losing it to a calamity or having it burgled can be traumatic. Which is why insuring a house- be it independent or a flat, be it as a landlord or a tenant-is as important as buying a life cover. At a little less than Rs 10 a day, you can insure a Rs 20-lakh house, with contents worth Rs 5 lakh, against fire, earthquake, lightning, storm, even damage by a riotous mob. However, it's important to understand what a home insurance policy covers and figure out the sections that are relevant for you.

A home insurance policy not only covers your residence but also valuable personal property. The latter includes furniture, clothing, electrical and electronic gadgets, computer equipment and jewellery, among others. Not only are these protected against theft, but if expensive household items or consumer durables bought over a period of time malfunction or need repairs, the insurance company will compensate you for the loss. For instance, if the compressor of your three-year-old air conditioner stops functioning, the cover will pay for its repair and, in case of a replacement, for its depreciated value.

Homing in on tips
Real costInsure your house against fire/natural calamities for what it would cost to repair/rebuild, not for the real estate value, which is higher.
Discounted riskYou can insure all your jewellery, but pay a premium that is only
worth the ornaments you tend to keep at home.
Periodic reviewsReview the cover regularly, and when you buy household goods, have them included in your policy.
More for lessBuying a cover for 4-6 sections means a 15% premium discount; for over six, it’s up to 20%.

Insurers offer the policy as a package, in which the first section, the base, is a must have. The base policy is available in two sub-sections: one covers the building, and the other, its contents. The cover is against damage from fire and allied perils, specifically structural, and destruction from lightning, riots, explosion of gas in domestic appliances, and natural calamities like floods and earthquakes. For the best cover, mix and match the sub-sections to include cash, jewellery, television, even liability. The policy covers your legal liability to a third party for personal injury or property damage. For instance, if the air-cooler projecting outside your window falls accidentally on your neighbour's car, you're liable to compensate him for the damage.

However, not all sub-sections are of value and can be avoided. So the cover for loss or damage to baggage while travelling in India is not needed by all. Importantly, insure the house on the basis of its reinstatement. The insurer lets you choose between two options: cover against market value and reinstatement value. While market value means the replacement value minus the depreciation, the reinstatement cover is slightly more expensive as the sum insured is more. Opting for reinstatement is useful as it pays the replacement cost without depreciation and works well for electrical/ electronic gadgets.

Before you buy insurance, assess your risk, lower it where possible, and choose only those sections that match your needs. Your home and everything in it are certainly worth the price you pay for their security.

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