Quick, think of a natural disaster that destroyed homes, commercial property and government infrastructure. Can’t zero in on any one of them? That’s because of late, there have been so many incidents, it is difficult to remember just one. Earthquakes damaging homes, floods ravaging even urban areas, fires spreading like, well, wild fire, means natural calamities can wreak havoc with your dream home and cause some serious damage to your pocket.
The sensible thing to do is to take remedial action in advance, and not wait for disaster to strike. Preventive care is the best care. And when it comes to safeguarding your most expensive asset, you cannot afford to be negligent. But, somehow we are not very inclined towards securing our home by shelling out some money to buy adequate cover. Most of us think it is a waste of funds. Nothing could be further from the truth. Not only is it essential to have home insurance, it’s not even expensive. Just consider it as a non-optional expense for maintaining your home.
Now that you are convinced you have to insure your home, what’s the best way of going about it? Here’s what you need to know:
What to Insure?
The first thing to do is to decide exactly what kind of coverage you need. You can opt for either basic fire insurance, or the Householder’s Package Policy (HPP). An HPP will protect you against natural calamities such as fire, lightning, storms and floods. But the best thing about an HPP is that it protects you against riots as well. Some insurance companies will charge an extra premium in order to cover earthquakes and landslides. You can also insure your structure and its contents against terrorism if you opt for an add-on cover. An HPP also offers optional cover that insures the contents of your house against burglary, damage, and mechanical or electrical breakdown.
Opt for a plan depending on whether you want to insure just the land and the structure, or also the contents of your home. However, it is always advisable to take comprehensive home insurance, as it covers most eventualities.
Underinsuring Does Not Work
Since most Indians think of home insurance as an indulgence, or an unnecessary expense, they end up undervaluing their own property to save on the premium. It is self-defeating to undervalue your precious home. Look at it this way: you are insuring your home to get adequate relief, should anything go wrong, and not to save a few bucks. If you under-insure your property, you will not get sufficient cover to restore and repair your home if and when the need arises.
Compare Policies Before Buying One
It is imperative to compare home insurance policies before choosing one. You must have seen any number of ads on TV, telling you to compare policies before zeroing in on the one you think is the best. That’s the right message to take. So, go online, check out your options, have a frank discussion with your agent, and only then finalize your policy.
Learn to Compute the Premium
The amount you shell out for your policy will be determined by several factors — are you in a risky area/seismic zone? Do you live in a metro or a smaller city, a house or a flat, a lower floor or a higher floor (in case of a multi-storeyed building)? Depending on these factors, you can figure out the premium you should have to pay for your policy.
Insurance is a Long-term Commitment
When you think of insurance for your home, do not be short-sighted. Think long-term, as you will be living in your home for many years, not just a year or two. Infuse permanence in your policy and take a long-term cover, say 20 years or so. Besides, when you take a long-term policy, you do not have to renew the policy every now and then, and it also reduces the amount you pay as the premium.
In the end, you are securing your most important asset; cutting corners will not help, so, make a sensible decision. And while you need to have a clear idea of what all your home insurance policy includes, it is equally important to know what the exclusions are. Remember, willful destruction of property is a crime, and will not be covered by your policy.
Suneeta Kaul is a journalist, a writer, and a blogger. She tracks the economy, the corporate sector and the stock markets, and is a keen follower of current events. Having started her career with The Economic Times, she has worked for publications such as The Asian Age, Business India, and Thomson-Reuters, among others.