5 Points to Consider in a Home Insurance Policy
Table of Contents
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 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: You calculate 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.
Well, now that you know what you should consider 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.
Disclaimer: Though the views expressed are of the author’s own, this article has been checked for its authenticity of information and resource links provided for a better and deeper understanding of the subject matter. However, you're suggested to make your diligent research and consult subject experts to decide what is best for you. If you spot any factual errors, spelling, or grammatical mistakes in the article, please report at [email protected]. Thanks.