How Can Home Insurance Save You From Financial Distress?

When Mr X received an unexpected call while at work, a short circuit had caused a fire in his apartment - he was about to realise the importance of having ‘Home Insurance’. By the time the fire department arrived, most of his furniture and household stuff were charred, along with some walls. The repairing costs for these kinds of damages usually run in lakhs and can potentially drain your savings or emergency funds. However, having home insurance can save you from financial distress when met with such unfortunate happenings.

What Is Home Insurance?

Contrary to popular belief, home insurance is not just about protecting the structure of your house or building. It also covers the belongings inside it, which depends on the kind of plan you are opting for. Typically, this insurance provides coverage against natural calamities like floods, earthquakes, and cyclones, as well as incidents like fire, burglary, and vandalism.

What are the key covers you should look for in a home insurance policy?

Two main covers encompass a home insurance policy, namely;

Building cover: This would insure your home/building/structure against any disaster and damages

Contents cover: This would cover the contents of your house or apartment against any incidents such as fire or damages caused due to a calamity

Explaining the basic differences between these two covers, Dilip Baba, Head, Commercial and Speciality Underwriting, Go Digit General Insurance notes;

A Building Cover provides coverage for the physical structure of your home: the bricks and mortar, the roof, the walls, and any permanently attached fixtures. If your home is damaged by a covered peril (like fire, earthquake, or storm), the building cover will help pay for the repairs or rebuilding of the structure.

The content cover, on the other hand, provides a financial cushion for damages to belongings inside your home. This includes electronic appliances (such as refrigerators, televisions, and air conditioners), portable equipment, furniture, fixtures, home furnishings, and more.

“To have more comprehensive protection, opting for both via comprehensive home insurance is highly advisable. This contents cover can also be opted by renters to safeguard their belongings inside their rented home,” he notes.

What add-ons should homeowners consider?

Here are some key add-ons that homeowners can opt for alongside a comprehensive home insurance policy;

- Valuable Contents add on,

- Additional Living Expenses add on,

- Tenant Liability

- Loss of rent or rent for alternate accommodation add-on.

“These add-ons can enhance the coverage significantly. Some policies also offer personal accident benefits to the insured and spouse for injuries leading to death in case an insured peril like fire, flood, etc. affects the property,” Baba states.

He further informs that for a wider cover, there are home package policies available where additional covers related to burglary, theft, equipment breakdowns, etc., can be opted for. These also offer all-round protection including workmen compensation covers for employees working on the premises like the maid, mali, and driver.

Exclusions You Should Know About

When looking for all-around coverage, don’t forget to check if there are any key exclusions in your policy.

Says Baba, “The most common exclusions are from losses stemming from ‘intentional acts’ by the policyholder or anyone on behalf of the policyholder.”

Exclusions often also include any damage caused by war or invasion. “It also excludes losses from radioactive contamination; pollution damage is generally excluded unless it directly results from a covered event,” he informs.

Before making a policy purchase, you should ask your insurers what the exclusions to your policy coverage are in simple terms. This hygienic check can protect you from any unpleasant surprises later while making a claim.

How Does the Claim Settlement Process Work?

In addition to knowing key exclusions, policyholders should also understand the claims settlement process before buying the policy. How would the claim process typically work for home insurance claims?

Taking note of the processes at Digit, Baba informs that one can intimate a claim simply by either contacting the call centre or by sending an email. The policyholder will then get a confirmation email for the claim intimation with a unique ID number.

“For claims below Rs 1 lakh, a survey is completed virtually with minimum documentation. If the claim amount is higher, the insurer may depute a licensed surveyor to visit the site, conduct the inspection, collect the documentation, and submit a detailed report,” he explains.

Once this analysis is complete, the claim is settled.

However, Baba notes that “Claims may get denied if the damage is not caused by a covered peril or falls within a policy exclusion or any type of misrepresentation is done by the insured. It is always important to read the policy document thoroughly in order to enable a smooth claim process.”

At the time of making a policy purchase, you ask your insurer or the insurance agent to brief you regarding claim processes along with documents that might be required at the time of a claim.

Is home insurance mandatory for homeowners who have taken a home loan?

You might have been asked about any home insurance or possibly purchasing one while availing of a home loan. Is this always the case? The simple answer is No.

Confirms Baba, “While it is not mandated by law, banks or financial institutions may ask the borrower to take home insurance while availing the home loan. Banks insist on it to protect their investment against potential losses due to damage or destruction of the property.”

However, the same may vary from bank to bank.

“It is in the customers' interest to compare and get the best scope of insurance, including all relevant add-ons to cover the risks adequately and not just take insurance to the extent of the bank’s interest,” Baba advises.

For many, home insurance is not just another financial product, it could be a shield that can save you from financial distress when the unexpected happens. Before buying home insurance, you should carefully assess or get expert help to understand your financial standing and decide on any insurance coverage (including add-ons) based on your needs.