5 Points to Consider in a Home Insurance Policy

The do's and don'ts of choosing an insurance policy for your home

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5 Points to Consider in a Home Insurance Policy

Indeed, your home is one of your most valuable assets that gives you comfort after a long tiring day.

However, any sudden fire or vandalism can destroy your ‘abode.’ I’m sorry if I scared you, but that is not my intention.

The fact is that anything can happen at any time, anywhere.

The situation deteriorates further in the case of natural disasters like earthquake, cyclone, flood, etc., which can affect you both financially and physically.

The houses which took years to build, get damaged or destructed in a wink of seconds.

It sounds bad, and it is certainly sad to whosoever it happens.

Alarming as it may sound, it happened to a quite a lot of people, globally.

In the 1994 Northridge earthquake in Los Angeles, United States, there were property damages amounting about $40 billion.

The Great Hanshin earthquake of Japan in 1995 caused irreparably structure damages to nearly 400,000 buildings.

The 2001 Gujarat Earthquake had a toll of 3,50,000 destroyed houses and 8,44,000 damaged ones. In Jammu & Kashmir in 2005, about 2,600 houses were destroyed.

The 2011 Christchurch earthquake of New Zealand reportedly had property damages from $16 to $42 billion.

In the 2015 Nepal Earthquake, about 1,60,786 houses were destroyed and 1,43,642 damaged.

This horrifying list is endless and you can view it here for more information.

The most important and relevant question now is: What could you do to secure your house?

While there is little one can do to evade natural calamities, it is feasible to minimize the risk with the help of home insurance.

However, merely choosing the policy doesn’t mean your house is completely secured.

Before you buy any home insurance policy, it is imperative to consider whether it will secure the property or not, otherwise you might be at a loss when an unforeseen situation crops up.

Factors to consider before buying a home insurance policy

Here are some simple and easy points to consider while buying a home insurance policy:

1. Choose the Right Home Insurance Cover

Besides compensating you for the money in case of any loss or damage to your property, the insurer also covers you if you need to repair or renovate your house after any accident.

In other words, insurers also cover post-accident recoveries. It is applicable in those situations when the recovery amount of the accident would be more than the actual loss.

For instance, your jewelry got lost or damaged in a fire accident. In this situation, you can approach the insurer to claim the loss incurred as per the cover you have taken along with any additional expenses for clearing the debris or repairing it.

Before choosing the policy, it is essential to evaluate the location of your house and its risk-proneness.

Do you live in an earthquake-prone area or your place is near to the sea?

It makes complete sense to choose the right cover after analyzing all possible scenarios.

2. Go for Sufficient Coverage

Besides natural calamity, your house is susceptible to human-made disasters also which may occur due to lack of farsightedness.

It is essential to choose the correct sum insured on the basis of the assessed value of your belonging and the structure.

Some people choose lower insurance coverage just to save premium amount. However, this may prove costly in a long run when you may require in case of damage a huge sum, but your property is underinsured.

To get the maximum benefit, it is essential that your insurance cover should be sufficient. Mainly, a home insurance policy has the following components:

The cover for structure can be computed by any of the following methods:

  • Reinstatement value: It is calculated on the basis of the built-up area and total construction cost.
  • Agreed value: It comprises the area of the land and the total cost of the house.
  • Indemnity value: It includes the total construction cost and the depreciated value of the property. That is, if the calculation is done on the basis of the indemnity value, it will be the total construction cost minus depreciation.
  • Cover for content: At the time of purchasing a home insurance, it is important to disclose the correct value of all the insured items. There is no point in insuring the 10-year old gas stove of your grandmother on a depreciated value, even if it is in a working condition. You should start making the inventory of items which you want to insure. Some insurers may ask you to submit photographs of the items which you want to insure while some don’t go into details and thus, completely rely on the list prepared by you.

3. Go for the Reputed Insurance Company

Don’t choose an insurer who is offering you a competitive rate as compared to the other players in the market.

Since it is about the safety of your house—one of your valuable assets— you must be careful while choosing the insurer.

One of the easiest ways to do is to browse through different online discussion forums or feedback sections to know about the particular insurer.

You can also check the claim settlement ratio of the insurance company before finalizing the deal. This ratio is the yardstick for the buyer to decide which insurance company is reputed and profitable. A high claim ratio means that the insurer is honoring maximum claims.

With several insurers introducing innovative home insurance policies these days, it is not very daunting to choose the right one to comply with your needs.

4. Compare Insurance Before You Buy

As insurance doesn’t come with ‘one size fits’ all approach, it is important to compare different insurance policies thoroughly before choosing the one thoroughly compare different insurance policies before choosing the one.

You can connect to brokers like SecureNow to compare insurance policies at one go.

5. Carefully Read the Policy Terms and Conditions

Never ignore the policy document thinking that it includes only those inclusions and exclusions which your agent has already communicated to you.

It is important to read the fine print carefully and cross check terms and conditions you have agreed upon. If there are any errors, including spelling mistakes, immediately bring it to the knowledge of the insurer and get it rectified as soon as possible.

Summing Up

Well, you know what should be considered while choosing a home insurance, here is a quick look at some don’ts while buying home insurance:

  • Never rely on an agent to fill up the insurance form for you
  • Never hide any material facts about your property, be it past accidents, renovations, etc.
  • Stay away from over and undervaluation of property

As Rosalynn Carter, the former first lady of the USA said, “There is nothing more important than a good, safe, secure home,” it is necessary to secure your house from all unforeseen perils.

And, a comprehensive home insurance policy is apt for that!

Over to you –

Have you ever thought of having or do you have a home insurance policy? What do you look for in it? Share your experiences in selecting the best insurance policy for your home.



Last Updated on: November 14th, 2016


Profile photo of Utkarsh Sahu
Utkarsh Sahu is a ghost writer, curator, literature geek and author. He has several journals, articles and papers to his name. Writing is his passion. He writes about mostly all genres.

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4 Comments - Read and share thoughts

  1. Lea Bullen

    November 15, 2016 at 6:04 am

    Where was this post when I was buying a house. Getting homeowners insurance can be so confusing because you don’t want what you’re getting yourself into.

    I completely agree you should shop around, as you would with any insurance. You will not know a good rate unless you have something to compare it to. So you have to check with other companies, even if your mind is already made up.

    ~Lea

  2. Amar kumar

    November 15, 2016 at 11:58 am

    Hey Utkarsh,

    Many people think of home insurance as a necessary evil. The truth is that it might feel like that, but only until we need it. At that point, it will feel like a savior. We’ll definitely be very glad to have home insurance when we get our financial life back. Home insurance is really meant to protect what’s very likely our biggest and most valuable asset. We’ve really worked hard for what we have. So, it only makes sense that we need to protect it from the myriad of things that can cause it harm.

    One of the most important things to understand from the very beginning is how much insurance we’ll need. First of all we need to know the actual value of our home. If our home is damaged or destroyed, we’re going to need to know what it will cost to replace the entire structure or that portion of the structure which is damaged. It’s important that we realize our premium is based around the risk that the insurance company is taking by selling the policy. Eventually, thanks for reveling a light on this topic.

    With best wishes,

    Amar kumar

  3. LH Louis

    November 17, 2016 at 4:57 pm

    As I hear the word home is an asset, I’d immediately think of Robert.

    But getting back to topics, policy of an insurance company or any company, it’s best to read it over and over before take action.

  4. Burt Silver

    January 24, 2017 at 11:02 pm

    My wife and I are about to buy our first home. We are really excited for the new chapter in our life, but we aren’t completely prepared in terms of home insurance. We want to get a policy that is perfect for us. Thanks for mentioning that you should compare different policies in order to determine which works for you. It always helps to put them side by side and figure out what works and what doesn’t. We will have to do that to find the right policy for us.



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5 Points to Consider in a Home Insurance Policy

by Utkarsh Sahu time to read: 5 min
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