10 not-so-common questions on home insurance policies

I have been thinking a lot about a home insurance policy and in the process, did a lot of research. Me and my wife recently got our first house and for all of us, our home is one of our precious assets that gives me the comfort and peace after a long tiring day at work. It is the place where you sink in and to think of the risks of anything happening to it is seriously worrying. You put in all your savings, risking a huge EMI from a Bank. EMI stands for Easy Monthly Installments, but is should be HMI – hardest monthly installment. 😀

PS: It is rather just coincidence that Vijay Mallya story doing rounds these days and I am writing this :P.

Home is a name, a word, it is a strong one; stronger than magician ever spoke, or spirit ever answered to, in the strongest conjuration.” Charles Dickens

So what can go wrong?

I for one, cannot forget the day of 26th of July, 2005. Apart from holding a very special place in my heart for a different reason, that day scared the heck out of me. Yes, it did. Natural calamities like such as an earthquake, and flood has time and again caused loss of life and property alike. The life comes to an abrupt halt whenever any natural calamity strikes and the destruction it brings with it leaves unbearable financial and emotional pain. You cannot rebuild a life that could not be saved, but you can rebuild your life.

You cannot rebuild a life that could not be saved, but you can rebuild your life

Prodded by something that happened at my work place, I was talking to P V Subramanyam the other day about an doubt on the insurance idea that I had, and it was related to the home and fire insurance and what can be done so that people can buy them. After talking to him, I still wanted to read more.

While there is a little one can do to help with the emotional loss, there is something that can be done to reduce the hardships, may be with an insurance policy and get a maximum coverage. The debates about which is the right policy is always open, and there will be many people willing to sell you anything and if you are ever going for it, look for a policy that offers complete protection against both natural and man-made calamity.

I love to be stupid and learn, that is what I do at every learning session I attended. You can be stupid in a closed environment, but not once you are in the situation yourself.

More importantly so, you should target to get the maximum coverage, and that means to have a complete understanding of the policy. That is exactly where should not think twice before asking questions that may even seem stupid because only then you will be able to get a more clarity. I love to stupid and learn, that is what I do at every learning session I attended. You can be stupid in a closed environment, but not once you are in the situation yourself.

Based on my own research, here is a list of not-so-frequently asked questions on home insurance. I hope it gives you an exposure on what to ask or think when thinking about home insurance.

My house is on the top floor of a highrise, how much cover should I take?

Home insurance policies do not include the cost of land. It pays you only for the cost of the construction of the house, which is calculated by multiplying the carpet area of the floor with construction cost, prevailing in the city. For instance, if your carpet area is 1000 square feet and the construction rate is Rs 600/square feet, the sum insured for your home structure is INR 6,00,000. Here, the floor of the building is not considered by the insurer for computing your construction cost.

I am tenant, and want to know if I buy a policy and I had to change my house, will it still work?

Interestingly, I found some people asking questions about taking tenant insurance (I don’t think Indians know they can do that). Basically, the Insurance cover is for your tenancy home with your articles and not for the house itself.

So if you have moved out to a new rented place, you can get your home insurance policy endorsed for change of address.

I live with my friends; can I still buy a home insurance policy?

As with the case above, it is possible for many in India to own a house in a place away from their home town, where they have moved for work. If the house belongs to you and you decide to share it with someone who pays you rent (think PG), you can buy a policy to cover  everything. Also, I was surprised to know that people who are co-occupants can buy the cover for the part of their stuff too. Be weary though, the insurance companies have rights to reject your policy application if it gets too messy.

What if common tank starts leaking and impacts the structure (god forbid), will my home and stuff still be insured?

Yes, it will, but the policy only covers structure and content against bursting and overflowing of water tanks. If your tank leaks, that is something that you will have to get it fixed. Be mindful that if a tank burst happens caused by leakage unattended / lack of maintenance, then they will not be covered.

I am selling my house, what should I do as I have a policy?

Well, congratulations! Hope you got a good price for it. If you are in the process of selling it, you will need to inform the company and ask them to cancel the policy. (I am still trying to get information on what level of money you will get back after cancellation, so expect me to update this).

I have a policy, but how much will I need? Am I under-insured?

It is important to understand that a property’s value changes up and down depending on a lot of factors – including the rise in market rates. So you need to speak to your home insurance advisor and re-evaluate the policy to ensure you are getting complete coverage. Yeah this may affect the premium, but you will get a complete coverage. Otherwise, the company will think that you will take care of the remaining damage.

So premium rates are affected by where I stay?

Of course! Look for a house which is near a Police Station or a Fire Station, you are looking at saving a lot more money. 🙂 But older the building, higher the premium consequently.

Can my insurer pay me a compensation (rent for example) to stay some other place if my house is inhabitable? 

Yeah, some do! If you can get that one – it kind of seals it all. Since you will have lost some time and money, this kind of an arrangement can help you recover more of it.

Remembering the deadly floods, will the basement be covered?

Hmm, lets pray you we all can avoid floods. But in case it does come knocking your door, the insurer can cover that too. And yeah, the premiums should be including the value for basement as well.

How am I supposed to inform the insurer after the disaster?

Grr… that is the last thing you want to hope for, but the first thing that you should! Call the advisor or the company call center, and tell them what happened (just like a Health Insurance policy). They would send their designated people to survey and prepare a report. They then go about settling a claim on how much was insured and damaged, minus what is recoverable. The good thing to hope for is, in case of floors or fire, when you may have missed a lot of documents, the process is completed with minimum hassles.

I read up a few of the above points from ICICI Lombard site. And since home insurance policy is an important addition to list of assurances and safety, I recommend always reading as much as possible. But how well you choose the policy and use it could make the real difference. There are many companies that offer home insurance in India so be sure to find the best that suits your interest. I read some bits of it at an economic times article.

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