The average Indian earner has to wait at least 10 years before they can buy their first home and for a sizable chunk of Indians, buying a home eats through a lion's share of their savings. It is one of the most important purchases we make for our families, and our futures and a lot is dependant on it. Then why are we, as a community so reluctant to go the extra step and secure our homes, the best we can?

Home insurance is a measure that is easily made available by several vendors in the insurance market, for homeowners who wish to secure their home from a plethora of vulnerabilities. Not many of us truly actualize the value of home insurance, usually waving it away because of hefty premiums, and lack of information. Like most insurances and covers go, the value of one is appreciated, only when misfortune strikes. As unfortunate as it is, a crisis is made more bearable, when one doesn't have to worry about the financial loss as well. Home insurance is seminal in protecting your home, from cases of burglary, calamity, or even accidents.

In this article, we will work towards lifting the veil and demystifying the matter of home insurance. From understanding what it is, why it is important, types of home insurances in the market, and finally selecting which one is right for you, we will delve into all the details that make home insurance an absolute necessity.

WHAT IS HOME INSURANCE?

Home insurance serves its purpose like other insurances, in protecting one's home against potential risks. A homeowner can very easily transfer the risks of hefty damages or loss to the insurer by paying them just a fraction of the assessed risk, in the form of regular premiums.

It is important to note that there are other kinds of property insurance available too, and home insurance is just one of them. The two differ in what kind of property they are insuring. Home insurance is custom made to protect an individual's home, and its possessions against damages, caused by a list of reasons. It also offers liability cover for accidents on the said property or inside the home. Most popular insurance vendors also offer home insurance.

WHAT DOES A HOME INSURANCE GUARD YOU AGAINST?

One of the prime reasons why Indians are still shying away from buying home insurance is because most don't deem it important enough. While we hope the chances of misfortune befalling your home should be low, one must still be prepared for the darker days. Home insurance extends to you, the luxury of remaining financially stable, should something happen to your home. Here are some compelling reasons to buy home insurance. It is important to understand what the insurance promises you before you signed on the dotted line. Insurance vendors will also take stock of your belongings, access your valuables before settling on a premium, designed to cover your assets.

Natural Calamities

Natural calamities, often monikered as the Act of God, is an event nearly no one sees it coming. And weather reports, so close to the crisis isn't helpful to home structures. While one can't save their home from the brunt of a natural calamity, one can prepare for damages and repairs that the house will require. This means that you don't have to worry about the costs that you will incur while rebuilding your home from scratch. Natural calamities that are commonly covered under home insurance offered by popular vendors are earthquake, lightning, storms, cyclones, hurricanes, floods, indentations, landslides, volcanic eruptions, and in the case of fires. It is to be noted that ICICI Lombard's Home Insurance in particular also offers coverage against missile testing operations. Reports state that only 1% of those who can afford insurance against natural calamities, actually opt for the service. This statistics is appalling, because almost 30% of the Indian landmass is prone to earthquakes, while almost 27% is vulnerable to mild quakes. Another whopping 60% is susceptible to floods (the Chennai and Kerala Floods wrecked damage to many homes, most without insurance) and other devastating calamities like tsunamis and cyclones.

Theft, Burglary and Vandalism

Theft or burglary at home can cause a lot of emotional and financial anguish. While home insurance cannot return things of sentimental value to you, it cushions the blow by remunerating you for your financial loss. It is to be noted that some vendors offer separate policies for theft and burglary in your home. Home insurance will cover you any loss or damage inflicted on your home, in the process of the burglary. The cost of the stolen items will also be compensated. However, it is important to mention that home insurance does have certain limitations, in the case of burglary and theft as well. Several vendors state that if cash, precious metal or share certificates have been stolen, those won't be covered under the policy. The contract can also be breached if the burglary is an inside job, or was conducted during a time of public unrest or a riot. While home insurance is an absolute necessity, one must remember to read the fine print and then pick one, that suits them and their housing needs the most.

Temporary Costs of Living

Should you and your family find yourselves displaced from your home, because of structural damage or renovations, home insurance is liable to cover your temporary costs of living, in the form of rent, or hotel tariffs etc. Some popular vendors that cover temporary costs of living are ICICI Lombard and Bajaj Allianz.

Damage to Insured Assets inside Home

Home insurance also covers individual assets inside your home, in case it is damaged or destroyed. This could mean your precious art, furniture, electronics or heirlooms. Your property doesn't have to be damaged for you to claim insurance, just the insured item is enough.

Premiums for such home insurance are pre-decided, taking stock of your entire asset collection, material goods and valuables that you would like covered.

Personal Accidents

A big reason to get home insurance is covering your health and life, inside your home. While we do have medical insurance to cover our medical expenses, at the time of an accident, home insurance will also cover personal accidents, permanent disablement or death caused inside your home, or anywhere else in the world.

Protection against Liabilities

This is a particularly important provision to have under home insurance, especially since mishaps and accidents happen, without intent. Your home insurance plan can also protect you or a member of your family from your financial liabilities towards other people if you unintentionally cause them harm, within the confines of your property. For example, if a guest is injured in your home, by tripping over furniture, or by some other accident, your insurance covers all your financial liabilities towards the injured person.

Ease of Availing Home Loans

Several banks sanction home loans on the precondition, that you buy home insurance for your new home. It is a preliminary requisite for several banks.

WHAT HOME INSURANCE WON'T COVER

While it is important to learn about the benefits of home insurance, it is doubly important to understand its limitations, so you can still cover yourself against vulnerabilities in other ways. Here are the things Indian home insurance vendors don't cover, on principle. This is often done with the intent of discouraging crime and insurance fraud.

• Destruction of property willfully
• Damages inflicted on the property due to wear and tear
• Minor damages
• Loss or damage to property and assets in the time of war
• Loss or damage to property and assets during a riot
• Loss or damage to property and assets during a terror attack
• Loss or damage to property and assets due to radioactive contamination of ionizing radiation, caused by burning nuclear fuel. If your property is near a nuclear site, you will not stand a chance to get home insurance.

HOW TO CLAIM HOME INSURANCE COVER

Several publications report that home Indian residents are dissuaded from buying home insurance, because of the lack of clarity encircling the whole process. Homeowners believe that the process of claim settlement would be needlessly long and tiresome. While there is good reason to mistrust official process due to their notorious delays, you can do your bit to ensure a seamless claim settlement, from your end by following all the steps, carefully.

• Store all your policy documents and receipts carefully, so at the time of settling a claim, the insurance vendor can't dismiss your claim on the grounds of not having correct or adequate paperwork. Also, keep your KYC document handy.
• Take adequate pictures of the damage for which you want to file a claim. Enough evidence would give insurers lesser leeway to slip out of a claim. It is also important to intimate your vendor as soon as you can, so they can send officials to survey the damage themselves, without delay.
• In the unfortunate case of a robbery, keep a thorough list of all the stolen goods. The more detail-oriented you are, the lesser the space for doubt.
• Fill out the online form on your insurer's website and request a site visit for the claim settlement. Be sure to fill in all the correct data, because bureaucracy can delay the settlement process, over the smallest of mistakes.
• In the case of theft, burglary, assault, vandalism inside the home, the insurance company would also require a copy of the FIR that the homeowner has filed, in reporting the crime.

TYPES OF HOME INSURANCE

Now that we've understood the significance and importance of having home insurance for your home and family, lets now move closer to how to select the correct home insurance for your home. While opting for home insurance, one needs to be wary of how well the policy covers their requirements. We suggest understanding what the vendors offer, in great detail and then taking stock of what you need to be insured, before zeroing in a home insurance place.

In our current Indian market, vendors of two broad kinds of home insurance options. You can choose both, or either of the plans, as per your wish and requirement. Let's take a look.

1. Building Insurance

This particular kind of home insurance is dedicated to cover the physical structure of your residence. This offers protection to the building structure of your home, which includes the structure itself, along with permanent fixtures, and built-in items. This would mean the structure of the home, along with physical add ons like crown mouldings, bathroom and kitchen fittings, tiling and other fixtures that are attached to the structure. This variety of insurance protects your home from natural calamities and other disasters that damage the structure of your home.

There are two things to consider under this

- Reinstatement Value

If you choose to buy your home insurance based on the reinstatement value of your home alone, then only the cost of construction will be taken into account while determining the sum assured, during the settling of the claim. This would include the cost of labour, material and the reconstruction of the house.

- Indemnity value

If you insured your home, based on its indemnity value then the sum insured and the final claim amount will be determined by deducting the depreciation amount from the initial reinstatement value of the house.

2. Content Insurance

As the name aptly suggests, this type of home insurance plan covers the contents within the premises of your home, which would include valuables, furniture electrical and portable device or any other asset inside your home, that you would want to include in the plan.

THINGS TO CONSIDER BEFORE BUYING HOME INSURANCE

Now with all things said and done, these are the last set of rules one must keep in mind while exploring home insurance options and comparing vendors. A lot of time, energy and investment goes into buying insurance, but having the claim not come through is possibly the biggest trauma, especially at the time of a crisis. By keeping these considerations in mind, you can zero in the right kind of home insurance policy for yourself and your family.

Assessing Property and Assets, to Determine the Correct Coverage Amount

Before you go ahead and buy the home insurance policy and start paying premiums, first assess how much insurance coverage you would actually require. Take into account your property, its structure, your valuable belongings and assets and draw up a list. If your home and belongings are damaged, you should know how much the repairs and the replacements would cost.

To make it easier for yourself, you can even get a professional assessor to come help you put the correct number on your home and assets. The better your coverage amount is, the lesser you pay during the time of filing a claim. However, your coverage amount effectively determines the premiums.

Actual Cash/Replacement Cash

Another important detail to talk over before signing the contract is how the settlement payment will be made to you. Different insurance vendors have different policies and norms. You need to see which fits best with your needs, and urgency, so you don't have to wait in financial turmoil for too long before the insurance money comes in.

Another thing to consider here would be if you want to opt for actual cash or replacement cash. Your property and assets can be insured for either actual cash or replacement cash with the former meaning you will get as much money as you need for replacement or repair after deducting the depreciation. Meanwhile, replacement cost is the amount you might need to repair or replace damages without the cost of depreciation deducted. Your choice affects the premiums you would pay.

The Excess

The excess is the fixed amount a homeowner needs to shell out, should they claim their insurance cover. The insurer then deducts that amount from the total and pays the rest. The excess is the amount which the insurer will not pay. The amount of excess payable on your home insurance should initially depend on how much you can afford. You should be realistic with the amount of cover you need, so you're able to afford the excess during the time of settlement.

Never Hide Information

Hiding information, deliberately withholding important information or misinformation is considered grossly wrong by insurance companies, that holds the potential to completely negate your coverage. Do not hide property-related information from your insurers, especially those that have had accidents, or renovations. If you've made an unusual property purchase, and what that covered, you need to disclose the history of the building to your insurer.

Discounts and No Claim Discounts

It's a good idea to find out what if the home insurance plan offers discounts for employing external and internal security measures, that keep the property and assets safer, as an incentive. This could be in the form of having an alarm system installed or a fire extinguisher in place. Similarly, discounts can also be availed if your property is located close to a fire station or a police station.

It's also important to find out if you can avail the No claim discount if you haven't made a claim in over one year. This should be an added incentive and should lower premiums considerably.

Check Claim Settlement Ratio

Needless to say, enquire about enough insurance vendors and do your homework. An important aspect to look into is finding out what the claim settlement ratio for any particular vendor is. Don't be pulled in just by the attractive pricing. Your relationship with your policy doesn't just end there. If your insurer is reluctant to settle your claim, even after paying premiums over the years, then it is a matter of huge financial and emotional loss. Keep an eye out for the claim settlement ratio and gauge with your vendor is fair in the way most claims are settled. If the ratio is extremely low, you'll know the vendor is stringent and most claims go unsettled.

Read and Upgrade your Policy

Don't be swayed by the persuasive agent who is trying to sell you the insurance. Make sure you've read and understood all the terms and conditions and everything else in the fine print before you sign yourself into the contract. Vendors can easily throw their hands up later, claiming that they don't cover certain things, and you will be pushed into a corner, as you're bound by the same contract.

Alongside that, it's a good idea to revisit your home insurance policy each year to keep it updated and upgrade it if you've made new asset additions into your home.

Compare and Buy

And lastly, weigh all your options and then zero into the policy that serves your interests the best. Be careful and look past the sales pitches and see how much of a value add the home insurance policy would bring to your life, should a crisis occur.