Home insurance is an insurance policy that covers the costs and damage to your home or any insured property. It is a form of property insurance and one of the several types of general insurance products.
Home Insurance – Coverage & Exclusions
Home insurance is also called homeowner’s insurance. It safeguards your bungalow/apartment/rented flat/owned house/built home against potential risks. It covers the costs of damages due to any unfortunate event. Home insurance can be claimed for damage due to the following causes:
- Natural calamities such as windstorms, hails, fire or lightning
- Man-made problems like riots, theft, vandalism, or property destruction due to any civil commotion
- Damage due to rail or road constructions
- Collision of airplanes or any vehicle (not your own)
- Explosion or smoke
Coverage offered under Home Insurance Policy
The home insurance policy covers various kinds of damage. For example, damaged electric lines/wires, water pipelines, or structure damage. It also provides coverage for broken windows/doors/floors/walls. Not only the house but also covers for the loss and damage to the contents of the house. It can be broadly divided into four kinds of costs on the insured property as below:
- Interior damage costs
- Exterior damage expenses
- Loss/damage of personal assets/belongings from a house
- Coverage for physical injuries that may occur while on the damaged property
Home insurance policies may differ in what coverage they provide depending on certain factors. It varies according to the residence type (rented/owned) and size of the residence. Other characteristics like age, place of residence, replacement value, and location as well as the cost of belongings also matter. Your claim history or crime rate in the area can also matter. Finally, it depends on you what kind of coverage you choose. It is your choice about the amount of premium and deductible you are ready to pay. The deductible is the amount you have to pay before making the claim if the premium amount falls short of. When the deductible is high, the premium is less and vice-versa.
Although home insurance covers both natural and man-made causes, there are few accidents that go uncovered. For instance, there is no coverage for intentional damages, damages due to neglect, war situations, or ‘Acts of God’. These count as exclusions. Listing a few of them below:
- ‘Acts of God’ include calamities like floods and earthquakes are excluded in a home insurance policy. Some providers may come with additional coverages for these disasters in specific cases or customized policies
- Damage occurring due to low or zero maintenance and neglect of the property
- No cover for damage due to termites, rodents, birds, rot, molds
- Although there can be cover for fire and smoke in some circumstances, it doesn’t cover up smoke arising from industrial or agricultural operations
- If any damage is done by a home member intentionally or accidentally. For example, a collision with one’s own vehicle will not be covered under a home insurance policy
- Any destruction to the property under Ordinance of Law or court’s order
- Damage due to nuclear hazards or war in the country
Why should you have a Home Insurance Policy – Benefits
You should have a home insurance policy because it covers the financial loss. You may also have to bear the damage to property and its belongings under conditions not controlled by you. The benefits of a home insurance policy are:
- You can get monetary aid for repair and damage control due to unfortunate events
- If a third party causes damage, you can claim insurance without getting into a legal rift
- It is easier to get a mortgage (home loan) for repair/reconstruction/expansion if there is property insurance
- The costs of loss of home’s belongings and content can also be covered up. Home belongings like appliances, furnishings, furniture, gadgets, or jewelry
- Coverage is there not only for damages due to accidents or calamities but also due to theft, robbery, or burglary
- There are types of home insurance policies that are designed to cater to specific requirements. These policies include Landlord’s Insurance or Tenant insurance. The landlord can claim the landlord’s insurance when the tenant (public liability) does damage. Also, when there is a loss of tenant’s payment (rent) due to other reasons. Similarly, the tenant can get insurance for his/her own belongings in a rented flat
How to Claim Home Insurance?
In order to claim home insurance money, you may need documents and evidence for the damage. Documents like police FIR/investigation report and statements from fire brigades/authorized organizations/residential society. Also, medical officer’s certificate of death or disability if required. Apart from that, you may need court summons, repair estimates, invoice/proof of owned contents, etc.
You have to pay the deductible for making a home insurance claim. The insurance amount you get will depend on the type of policy you have. It depends if your coverage provision will be based on the actual cash value or the replacement value. It is explained further below:
- Actual cash value gives the present value of a house/house item. It deducts the depreciation from the cost of the item when it was new. Depreciation is the loss of value of an item/property due to the age and condition of the item. Depreciation calculation may depend on the insured item and the insurance provider
Suppose a television set is insured and is damaged/stolen due to robbery. The insurance amount will be the coverage of the cost of the TV based on its reduced value at the time of the claim
- Replacement value coverage means it will cover the actual cost of the damaged property or an item. It will provide the insurance amount to replace it
Let’s assume the damaged/lost television set is 3 years old and coverage is as per its replacement value. Then, one can claim the insurance amount as the cost of the TV set at the time of its purchase. The insurer shall cover the cost of buying/replacing with a new TV set of similar quality in place of the lost/damaged one
Wrapping it up:
In today’s unprecedented times, having a home insurance policy is a must. It always helps to guard your property against unpredictable damage and associated costs. It is important to check what costs are covered and the exclusions before making a decision. You can take more than one insurance to get discounts. Alternatively, you can agree to share the costs of repairs to lower the premiums. If you take insurance from more than one company, they can compensate on a proportionate basis when you claim the amount. Although you can rent the insured house, if you sell the property, there is automatic cancelation of the home insurance policy.