Is your home insured against such calamities?
Keep your valuables under lock and key
Important Aspects to Consider
A fire broke out in Mr. Jay Shah's home last month due to a short circuit. While his family was safely evacuated, a large portion of his house was damaged. He was relying on his home insurance to cover for the losses; however, he later realized that he had opted only for a structure insurance policy.
Structure insurance covers losses towards repair or rebuilding of the home. It does not cover the cost incurred due to loss or damage of valuables, electronics, etc. inside the home. A comprehensive home insurance policy that includes cover for the structure and contents of the home would have helped Mr. Shah here.
Knowing what to look for in a home insurance policy will help you choose a cover that is adequate and suited for your needs:
Structure Insurance
Structure insurance covers losses or damage against the structure of the home in case of natural or manmade calamities. It covers losses due to complete or partial damage of the building, foundation, windows, etc. due to extreme weather conditions, fire, building collapse, etc. and is usually applicable for homeowners.
Content Insurance
Content insurance covers losses or damage against the contents in the home, such as jewellery, electronics, furniture, etc. Content insurance is applicable for homeowners living in their own houses or for tenants to protect the contents in their rented home.
What's covered?
Structure and content insurance cover losses from calamities such as earthquakes, storms, typhoons, landslides, fire, floods, pipe bursts, explosions, strikes and air crash damage. The contents are covered against loss due to burglary or house break-ins.
What's not covered?
Damage or losses due to destruction of property on purpose, war, wear and tear, etc. are not covered. It is important to remember that homes that are unoccupied for more than 30 days without prior notice to the insurance company will not be covered. Therefore, any claim arising during such a period is bound to be rejected unless otherwise exempted by the insurance provider.
Loss of contents such as jewellery and other precious items that are not under lock and key will not be covered. Additionally, paintings, works of art, antiques, etc. are not covered. There is a limit on the amount covered, especially for jewellery, and it is usually a percentage of the total sum insured for content. Losses where the insured's domestic staff is involved will not be eligible for coverage.
Residences used for commercial purposes, such as running a business out of your home, are also not eligible for cover under home insurance. Instead, a merchant's policy should be opted in such cases.
Add-ons
Several insurance companies offer additional features such as cover against terrorist attacks, rent in case of alternative accommodation, etc. at a nominal cost. It is wise to include those that are applicable for you at a slightly higher premium, rather than spend more in future.
Sum Insured
The sum insured in a comprehensive home insurance policy depends on the total of the sum insured for structure and contents. For structure, the sum insured is calculated based on the reinstatement value or the reconstruction value of the house. This is arrived at by multiplying the built-up area and the cost of construction per unit area in the particular locality.
For example, for a house with a built-up area of 1,000 sq. ft. and a construction cost of Rs. 12 per sq. ft., the sum insured for the structure would be Rs. 12,000 (1000 x 12).
For content insurance, the sum insured is calculated after deducting the depreciation of the item from the market value. The depreciation is based on the age of the item. Therefore, you should not expect to receive the present cost of a laptop if the one damaged in a calamity was 5 years old.
Total Sum Insured = (Built-up area X construction cost per unit area) + Market value of contents - depreciation
Understanding your specific needs and opting for a comprehensive home insurance policy helps to safeguard your finances and assets in case unwelcome visitors such as disasters come calling.
