10 Surprising Facts About Home Insurance You Must Know

In India, Home Insurance has substantially less awareness compared to Life Insurance or Health Insurance. This article aims to elucidate the concept of Home Insurance and enumerates 10 things you must know about the Home Insurance Policy.

What Is Home Insurance?

Home Insurance, also known as Homeowners' Insurance, is a type of property insurance that provides coverage to a private residence. Basically, it covers you financially from physical losses and damages that could happen to your house, furnishings, and other such residential assets.

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10 Things You Must Know About Home Insurance:

1. It covers the home structure as well as home contents.

Home Insurance provides a mechanism through which you can safeguard both the structure (physical framework) of your residence and your contents (valuable possessions) against various hazards. These hazards encompass incidents like fires, earthquakes, storms, and floods (often denoted as STFI perils - Storm, Tempest, Flood, or Inundation perils), as well as occurrences such as pipes bursting or overflowing, along with other unforeseen catastrophes.

Furthermore, Home Insurance also extends its coverage to safeguard your valuable personal belongings, such as electronics, jewellery, artwork, etc., from occurrences such as theft and other related risks.

2. Home Insurance is different from Home Loan Insurance.

Your Home Insurance Plan covers the expenses arising from the destruction or harm inflicted upon the insured residence's structure or its contents during an unfortunate event. On the other hand, Home Loan Insurance settles the outstanding home loan balance in situations where the insured individual is unable to repay the loan due to unexpected circumstances.

3. You cannot cover your house under Home Insurance if you use it as an office.

If you are using your home for business purposes or have converted it into an office space, you are ineligible to buy Home Insurance for that particular property. Claims submitted for incidents occurring when the property is being used for any purpose other than residential are declined.

4. It does cover the loss derived from a terrorist attack.

Home Insurance has the potential to provide coverage for damages caused by acts of terrorism, which can be included as an optional addition known as a rider with many insurance providers.

Several companies offer coverage for items like art, electronics, and household appliances through separate insurance policies or riders rather than being included in the comprehensive Home Insurance package. The extent of coverage for various secondary items varies depending on your specific requirements and the insurance company you select.

5. The wilful destruction of the property is not covered.

If the assessment finds that the damage or destruction of the property resulted from wilful and intentional actions, your claim will get rejected.

Apart from this, there are additional situations where claims are not covered, such as property loss occurring in times of war and damages resulting from regular usage or wear and tear. Additionally, antiques and cash cannot be included in the coverage of Home Insurance.

6. The Sum Insurance is calculated by the insurer.

The insured amount is determined individually for both the home structure and its belongings. The insured amount for your home is computed using a concept known as Reconstruction Value, while the valuables inside your home, such as durable items, are covered based on their market value, with depreciation factored in.

7. Coverage for architect fees mostly comes with a limit.

Many leading companies like HDFC ERGO General Insurance provide coverage for architect fees; however, this usually comes with a cap on this coverage. For instance, some companies restrict this payment to 3% of the claimed sum, which might be insufficient if you engage a high-cost architect. Thus, it is important to acknowledge that a portion of the fees would be your responsibility. Remember this aspect when selecting an architect for your home renovation.

8. The claim is settled based on the Assessment.

After you submit your claim, the insurance company will designate a surveyor who will visit your residence to evaluate the extent of the damage. Depending on the surveyor's evaluation, the insurance company will send you a check. With this payment from the insurance company, you can proceed with the necessary repairs or repurchases.

9. Home Insurance can cover alternative accommodation expenses.

Certain Home Insurance policies even encompass provisions for reimbursing temporary lodging costs if your residence sustains damage. This supplementary coverage can act as a safeguard for your finances, sparing you from potentially having to cover expenses for temporary accommodations during the period when your house is undergoing repairs.

10. The gradual water damage is not covered under Home Insurance.

Normally, water-related harm that is categorised as "unexpected and unintentional" is included, such as instances like a pipe bursting, whereas gradual damage, like a slowly leaking bathroom sink, is not covered. However, damage caused by flooding, such as the harm resulting from a storm surge during a hurricane, is eligible for coverage.

To conclude:

Understanding the intricacies of Home Insurance is essential to safeguard your cherished home and valuable possessions. From protection against unexpected perils to the nuances of coverage for specialised items, these ten crucial insights shed light on the realm of Home Insurance. As you embark on the journey of securing your dwelling, let these key takeaways serve as your guiding light, ensuring you navigate the realm of Home Insurance with confidence and foresight.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.