Why A Standard Home Insurance Policy May Not Be Enough For Your Home

For most people, buying a home is undoubtedly one of their biggest investments. As such, they often safeguard it from threats of fire, theft, or acts of nature through a home insurance policy.

However, not all insurance policies are the same and many policyholders find this the hard way when their standard policy doesn’t cover some of the losses incurred during any eventuality. So, as weather conditions become more extreme and urban hazards mount, knowing what your home insurance actually covers is more crucial than ever before.

What Does a Standard Property Insurance Cover

A typical home insurance policy in India has two components: building insurance and contents insurance. Building insurance insures the physical structure of your home—walls, roof, floor—against damages caused by incidents, such as fire, storms, lightning, or even plane crashes. Contents insurance insures the items within your home, such as furniture, appliances, electronics, and jewellery, against damage or theft.

However, a standard home insurance could be subject to exclusions. For instance, loss caused by earthquakes, flooding, or landslides will typically be excluded unless you add an extension. Likewise, should your property be rented, damage by tenants may not be covered unless you have a landlord rider. Theft or destruction during renovations is another grey zone in most policies.

The Increase in Climate-Related Claims

With more climate-related disasters—such as the recent flood in Chennai (2023) and landslides in hilly areas, natural disaster-linked claims have taken a steep rise.

According to numbers released by the General Insurance Council, natural disaster-led insurance claims in India surpassed Rs 30,000 crore in 2023, up by 25 per cent compared to previous year. However, homeowners were unable to make successful claims, as their basic policy did not cover disasters.

Most insurance companies provide an add-on for earthquake coverage under the “Act of God” clause, but it’s not automatic. Some people avoid such add-ons to reduce premiums, even though they expose themselves to financial risk.

Damage During Renovation

Another typical misconception is regarding damage to home while renovating. Let’s say you are remodelling your kitchen, and while the work is being done, a fire occurs because of a wiring fault. In such a scenario, your home insurance policy may not cover the damage. Most insurance companies insist that you notify them in writing before you undertake extensive renovation work. If you don’t, your claim will likely be denied.

Similarly, if your residence is left vacant for an extended period—say, you are working in a different city—and there’s a break-in or a pipe burst, your insurer would deny the claim if you failed to disclose the fact that the house was empty.

Tenant-Related Damage

For landlords, tenant damage is one of the places where insurance frequently doesn’t fill the gap. If a tenant accidentally breaks a wall or leaves a mess behind, most typical policies won't cover that. Some insurers make landlord insurance an add-on option, which pays for tenant damage, unpaid rent, and even legal fees—but very few homeowners know about it.

Another issue is underinsurance. Many homeowners take a policy when they first buy the house, but never update it. If your property value has gone up or you have bought new appliances and furniture, your existing policy may not be enough to cover the current value.

According to Insurance Regulatory and Development Authority of India (Irdai) guidelines, the sum insured should match the reinstatement value of the property—that is, how much it would cost to rebuild the same house today. But the majority of policies are not scrutinised annually, and homeowners remain underinsured.

New Guidelines and Simplified Policies

Two standardised home insurance products—Bharat Griha Raksha for residential homeowners and Bharat Sookshma Udyam Suraksha for small business premises—were launched by Irdai in 2021.

These provide coverages at the barest minimum that serve to make home insurance easier and more transparent. But they still do not cover all risks by default. Homeowners must opt for additional covers based on their risk profile actively.

Online insurers are also coming up with new home insurance policies with greater coverage. Some now enable you to purchase policies instantly through websites and apps, with coverage starting at Rs 200 a month for a sum insured of Rs 5–10 lakh. But the key is to understand what the policy covers—and what it doesn’t.

Home insurance provides peace of mind, but only if you know the small print. With increasing threats of climate change, crime, and damage from construction, depending solely on a standard home insurance policy is no longer sufficient. As an owner or a landlord, it’s essential to take a close look at your policy annually, evaluate the actual worth of your property and items, and include additional covers if required. A slight hike in premium now may prevent huge loss later.