What is Home Insurance?
Home insurance is usually called as hazard insurance or homeowners insurance (HOI). It is a form of property insurance designed to protect an individual’s home against damages to the house itself or the possessions in it. It also offers liability coverage against accidents in the house.
A house is one of the largest financial assets for an individual and his/ her entire family. Usually, a house contains a lot of household goods and personal property, such as furniture, clothing, jewellery, etc. If in some certain unfortunate event, such as theft or natural calamity, these things get stolen or damaged; the worries about the loss could cause a huge mental agony for anyone.
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It is, therefore, always advisable to insure the house and belongings to protect them against any unforeseen risk. The home insurance policy guarantees financial protection against any hazard, such as fire, theft, accidents or calamities to home and its contents.
A home insurance policy is usually a term contract, effective for a specific period of time. The premium charged for the home insurance policy depends upon the risk possibilities. For example, premium will be low for the house owner whose house is situated near fire station or is fully equipped with the sprinkler system and fire alarms.
Individuals purchase home insurance for two major reasons, which are:
- Protecting one’s assets: Home insurance covers the physical structure of a home as well as the personal property or belong- ings. It also covers the personal legal responsibility or liability of the insured for injuries to others or their property while they are residing in the insured’s property.
- Satisfying the mortgage lender: In most situations, the lending bank or financial institution requires the individual taking the loan to have insurance at least till the time the property is mortgaged to the bank, and also enlist the bank’s name on the insurance policy as the mortgagee.
The cost of home insurance policy depends on what it could cost to replace the insured items. Though the insurance policy is an extensive contract, it specifies clearly what will and what will not be covered under the policy claim. For example, generally, events like floods, earthquakes, acts of God or wars are excluded from the subject of claim.
However, in some geographical areas, separate policy for flood and earthquake are made to cover these risks also under the claim. As it is hard for anyone to predict any disaster or unforeseen risk, it becomes important to have a home insurance policy to give the home-owner a sense of security, peace of mind and protection of his/her family and belongings.
Comprehensive Home Insurance Policy
An individual can insure his/her house against fire, theft, natural disasters, third-party liability, accidental death or injury, etc. A comprehensive home insurance policy helps the individual to cover against all such risks. Usually, such policy contains 10 to 15 sections and a discount is provided by various insurance companies of upto 15 to 20 per cent if few sections of the policy are chosen.
Out of the 10 or 15 sessions, the base policy, that is, section 1 has the following two sub-sections
- Building coverage
- Protection of contents of the building from damage due to ruin and allied perils like fire, riots, lightning, floods, earthquakes, etc.
The comprehensive home insurance policy is usually divided into 10 sections, which include the following:
- Fire insurance of the building and household contents. Insurance of contents against fire risks is compulsory. The insured needs to choose a minimum of three covers for issue of a package policy.
- Burglary, theft, larceny, house-breaking.
- All risks insurance for ornaments, jewellery, and other valuables.
- Plate glass insurance.
- Failure of domestic electrical and mechanical appliances.
- TV, VCR, VCP and music systems.
- Pedal cycle insurance.
- Personal baggage insurance.
- Personal accident with family package discount of 10 per cent.
- Public liability and employers’ liability.
Some companies also provide insurance of household goods in case an individual shifts residence or rents upto certain time duration if he/ she faces some kind of contingency.
There are different Indian private insurance companies offering comprehensive home insurance policy, for example, ICICI Lombard, Bajaj Allianz General Insurance, TATA-AIG General Insurance, Iffco-Tokio General Insurance, Royal Sundaram Alliance, etc. On the other hand, there are several Indian public sector insurance companies providing comprehensive home insurance policy, for example, New India Assurance, United India Insurance, National Insurance, Oriental Insurance, etc.
Let us now look at the coverage provided by some of these Indian insurance companies under the comprehensive home insurance policy.
The ICICI Lombard’s comprehensive home insurance policy is offered over the counter. This policy offers expenses for temporary settlement covering, packing, unpacking, loading and unloading upto 4 per cent of the content’s sum insured. The insurance is not applicable if the premise is unoccupied for more than 30 days.
Bajaj Allianz’s Householders’ Insurance is a single policy offering protection for property and interests of the insured and his/her family members who stay in the property on a permanent basis. The comprehensive package policy covers all the above mentioned 10 sections and a unique feature is that group discounts can be availed by choosing more than 5 sections.
TATA-AIG Home Secure provides the policyholder the option to select from 6 pre-packed policies. The 15-section policy includes buying protection against the loss of money in transit and rent for alternative accommodation. Further, the policy sections become ineffective only when premises have been vacant for over 60 days.
Iffco-Tokio Home and Family Protector Insurance Policy offers protection against enhanced living costs and loan payment. The policy offers cover for an automatic rise in the sum insured for a time duration of 15 days pre- and post-wedding of a family member.
Compensation Offered
On the basis of the property insured, the insurance cover offers compensation equivalent to the market value or the cost of replacement. Sometimes, if the insured items are susceptible to depreciation, the actual value is provided. In case of public liability risk, the compensation amount is usually upto `Rs25,000.
Exclusions
The exclusions under the comprehensive home insurance policy are specific to the item or properties insured and are as follows:
- Under the fire tariff, the house needs to adhere to Class ‘A’ construction norms.
- Personal computers are exempted from this policy and a separate electronic equipment policy needs to be taken.
- Dish antennae are excluded from this policy.
Types of Home Insurance
Home insurance in India plays an important role in protecting one’s house, building or its contents from several unforeseen risks and hazards. The home insurance policy offered by the home insurance companies in India, usually combine three insurance policies together, including insurance on:
- The home and its contents
- The personal possessions of the homeowner
- The accidents that may happen at the house like fire or any natural calamities
However, the risk coverage depends on the type of policy. There are basically two types of home insurance policies available in India.
Building Insurance
Building insurance covers the house structure, like walls, windows, roof; fixtures and fittings, such as wardrobes, bath equipment, and kitchen units; and outbuildings, such as garage and sheds. A standard building insurance policy covers risks against:
- Fire, lightening and explosion of gas in domestic appliances
- Theft or attempted theft
- Third party liability and personal accident
- Burst pipes and other accidents related with water leakage
- Oil leakage from the central heating system and damage to air conditioners
- Vandalism or third party damage
- Damage caused by aircraft and impact damage
- Storm damage, damage due to falling of trees/branches
In certain calamities like earthquake, where complete rebuilding of a house becomes necessary, unsufficient policy cover amount cannot fulfil the objective of buying the insurance plan. Therefore, it is always suggested to calculate the policy cover amount near to the exact value that could be required while reconstructing the building.
Some insurance companies calculate the rebuild cost by assessing where the applicant lives, the type and age of the property, etc. In India, the home insurance companies mainly cover the building structure under the reconstruction cost. Sum insured is calculated by multiplying the built-up area of the house with construction rate per sq. feet.
Some exclusion of the policy includes:
- Damage arising from normal wear and tear
- Act of war or terrorism
- Sonic bangs from aircraft
- Radioactive contagion
- Frost damage
Content Insurance
Content insurance provides protection against several hazards of theft, fire and natural disaster to all sorts of things; an individual takes or keeps with him/her in the house he/she lives. It could be valuable jewellery, electronic goods, household appliances, or furniture.
In this way, content insurance pays for damage to, or loss of, an individual’s personal possessions, present within the home, where he/she lives. Here, the term, ‘possessions’ denote anything not permanently attached to the structure of the house building. Some contents policies may cover possessions, kept in outbuildings, attached to the house.
Usually, content insurance is purchased alongside home insurance. However, it is not mandatory and entirely depends upon the needs of the policy buyer. People may buy building and content insurance policies separately or together in one package, depending upon the risk coverage need. For example, if a person is living in rental accommodation, he/she may require only content insurance and not the building insurance.
Coverage Classification of Home Insurance
Though certain coverages are compulsory in the home insurance programme, it is not mandatory to have ‘one-size-fits-all approaches’ at- titude while buying and selling the home insurance policy. In other words, in spite of certain compulsory coverages, there is still sufficient flexibility in the required amounts so that the home insurance policy could fit the needs of most of the people. Thus, it is important for an individual to understand the meaning of coverage as per the policy.
There are six basic coverages of a home insurance policy, which are:
Coverage ‘A’
Dwelling (The coverage includes only the structure of the house and not the land).
Coverage ‘B’
Other structures (The coverage includes the buildings and structures, attached from the main residence by a fence, wire, or any other form of connection, however not otherwise attached to the house. Typical coverage for such spaced out structures is 10 to 20 per cent of the dwelling coverage. However, high amounts may also be purchased, if necessary).
Coverage ‘C’
Personal property (The coverage includes the contents of one’s home that are not attached with the dwelling. It may include jewellery, furniture, appliances and clothing. Such coverage usually covers 50 to 70 per cent of the dwelling coverage).
Coverage ‘D’
Loss of use/additional living expenses (The coverage includes the cost of living expenses, such as rental costs, in case, the dwelling becomes uninhabitable. It also includes reimbursement of additional living costs, covering the expenses to the insured for maintain a normal standard of living).
Coverage ‘E’
Comprehensive personal liability (The coverage includes personal liability for injuries and property damage occurred anywhere in the world).
Coverage ‘F’
Medical payments to others (The coverage includes those medical costs for which the policyholder is held responsible for an injury, occurred at his/her premise, irrespective of his/her any fault).
Home Insurance Claim Process
Insured people can claim home insurance for any damage to their property. In India, there are several insurance companies like Bharti AXA General Insurance, United India Insurance Company Ltd., Future Generali Total Insurance Solutions, etc. which have a systematic home insurance claim process in place.
The insured can claim by calling specific numbers of the insurance companies or emailing them. However, they need to provide all necessary information that include details of the policy of the insured and other relevant information regarding the claim.
Some of the essential documents required for filing a home insurance claim are:
- Claim form appropriately filled in all aspects and signed by the insured/claimant, detailing a clear description of the events.
- FIR or final police report in situations of property damage or theft or burglary.
- Copy of repair estimates, invoices, money receipts, etc.
- Satisfaction letter if the insured prefers to avail cashless facility at the insurance companies (in case of a corporate/firm, the company’s seal or rubber stamp is needed on the satisfaction letter).
- Any additional documents, if needed, can be called for on a case-to-case basis.
Let us now look at the systematic home insurance claim process of Future Generali Total Insurance Solutions.
In case of fire loss:
- Intimate online or call on the company’s emergency helpline number.
- Contact the fire brigade/police and protect the property.
- Future Generali will depute a surveyor for inspection or investigation.
- Submit the necessary documents.
- Settlement of the approved amount within 15 days from the date of submission of final documents.
In case of theft/burglary:
- Intimate online or call on the company’s emergency helpline number.
- Report loss to police authorities.
- Future Generali will depute a surveyor for inspection or investigation.
- Submit the necessary documents.
- Settlement of the approved amount within 15 days from the date of submission of final documents.
In case of engineering claim:
- Intimate online or call on the company’s emergency helpline number.
- Future Generali will depute a surveyor for inspection or investigation.
- Submit the necessary documents.
- Settlement of the approved amount within 15 days from the date of submission of final documents.
