What is Home Insurance?

There are different types of general insurance plans available in India. Of these, health insurance and vehicle insurance are perhaps the most popular. Home insurance, however, is often overlooked. This can be a costly mistake for homeowners if an unforeseen calamity or disaster damages the property. 

So, if you are an aspiring homeowner or if you already own a home, it’s crucial to understand what home insurance is and why it’s necessary. Check out these essential details below. 

What is Home Insurance?

Home insurance, also known as homeowners insurance, is a type of insurance policy that covers the financial risks associated with a residential house property. It also offers coverage for the contents and valuables in the home, as well as any potential third-party liabilities that homeowners may face. 

Like many other types of general insurance, home insurance also comes with customisable deductible limits. A deductible is a portion of the loss or expenses that you will bear out of your pocket. The house insurance provider will bear the rest of the costs. 

Types of Home Insurance Plans in India

Depending on the extent of coverage and the nature of the plan, you can find different types of home insurance in the market. Here is an overview of the most common types of homeowners insurance that you can choose from. 

• Structural Insurance

This type of home insurance covers the main permanent structure of the house property. It includes damages or repairs to the walls, roof, flooring, plumbing and other parts of the property’s structure. 

• Contents Insurance 

As the name indicates, this type of homeowners insurance offers financial protection in case of any damage to your belongings and valuables due to natural or man-made calamities. It also covers any loss of the contents of your home. 

• Fire Insurance

Fire insurance is also a type of home insurance. It offers financial protection in the case of any damage to the structure and contents of your home from one specific cause — namely, fire. The fire could be caused by a natural disaster or any other accident. 

• Theft Insurance

Despite having extensive security measures in place, the valuables in your home are vulnerable to theft and robbery. Theft insurance, which is a special kind of homeowners insurance, can be useful against such contingencies. 

• Landlords’ Insurance

If you are a homeowner and you’ve rented out your property, landlords’ insurance may be worth considering. It covers you against any financial liabilities or losses you may suffer on account of the tenant. 

Factors that Affect the Cost of Home Insurance

In order to enjoy the financial protection offered by your house insurance plan, you will have to pay premiums to the insurance provider. The premiums charged generally depend on the following factors. 

• The location of your house

The geographical location of your house plays a significant role in determining the premium for your homeowners’ insurance plan. If your house is located in an area that is prone to natural disasters or in neighbourhoods with high crime rates, you will have to pay higher premiums. 

• The size of your house

Larger homes are generally more expensive to insure than smaller homes. This is because it takes more money to repair or rebuild larger properties, particularly in the case of extensive damages. 

• The condition of your house

Older homes with outdated safety features or poor structural integrity are considered high-risk properties. As a result, the homeowners insurance premiums for such properties tend to be on the higher side. Insurers may also charge a higher premium for your home insurance if your property has outdated or poor plumbing and electrical systems. 

• The extent of coverage

The more comprehensive the coverage you choose is, the higher the home insurance premium is likely to be. For instance, a policy that covers both the structure and the contents of your home will be more expensive than a policy that only covers the structure or the contents. 

• The deductible you choose

A higher deductible means you must bear a larger part of the loss. This reduces the extent of risk borne by the house insurance provider. So, if you choose a higher deductible when purchasing your policy, you can reduce the premiums charged for your policy. 

• Your credit score

Some insurers also evaluate your credit score when deciding on the premium for your home insurance policy. A higher credit score indicates that you are creditworthy and more likely to pay your premiums promptly over the policy term. This reduces the risk to the insurer and consequently leads to decreased premiums.

Home Insurance: Common Inclusions 

The precise list of contingencies and expenses covered by home insurance in India depends on the insurance provider and the type of policy chosen. The following are generally included: 

• Damage to the property and/or contents due to natural disasters like floods or earthquakes.
• Damage to the property and/or contents due to man-made calamities like riots and vandalism.
• Losses due to burglary or theft.
• Public third-party liabilities incurred on account of the property insured. 
• The costs of alternate accommodation, if required (in the case of natural calamities, for instance).

Home Insurance: Common Exclusions

Like the inclusions, the exact list of exclusions also depends on the insurance provider’s policies. However, the following contingencies and causes are generally not covered by the average homeowners insurance policy in India. 

• Pre-existing damages to the building and/or its contents.
• Manufacturing defects in the plumbing or electrical lines for which the manufacturer is liable.
• Loss or damage to the belongings due to theft or robbery in which a household member is involved.
• Costs incurred for regular maintenance and upkeep of the house property.
• Damage to the structure or belongings due to mould, rodents or termites.
• Property destruction on account of any court order.

Conclusion

The bottom line is that home insurance is an essential financial product for homeowners. If you already own a house property that is not insured, it’s never too late to purchase an adequate cover. Alternatively, in case you are planning to purchase a new property, ensure that you buy a house insurance plan. This way, you need not worry about out-of-pocket financial expenses during mishaps. 

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