On the House

Don’t leave it to chance when it comes to your house- insure it against risks to the structure & possessions inside

On the House
Himali Patel - 18 July 2017

For most people, purchase of a house is the biggest financial outgo. House owners take pride in showcasing their homes and all the things that go into making it liveable. Yet, chances of insuring the house against perils are next to nil. These days, incidents of floods and earthquakes are common; and both these natural calamities impact our homes. Imagine your favourite sofa or rug floating in your flat because of excessive rains or your TV getting spoilt because of a short circuit.

One can never be sure of when disaster strikes, but we can definitely cushion the financial implications of such mishaps with a householder’s insurance policy. It protects your house from unwanted, unforeseen causes that can damage it, such as fire or lightning and smoke, storms of all kinds, explosions, riots or civil commotion, burglary, breakage of glass, vandalism, hooliganism and vindictive mischief. There are also some other risk covers that you can include in the policy to increase the scope of insurance under it such as public liability, employee compensation if you have servants at home and also cover for the contents of the house, such as TV, geyser, refrigerator, air-conditioners and even your clothes and jewellery.

What you get

The basic policy comes with two sub-sections: one that covers the building and the other its contents against fire and allied perils. If you live in a self-owned house, at the very least, you should look to buy cover under both these sections. However, if you live in a rented house, you can’t insure the building, but you must take insurance for the contents, as you have insurable interest in them.

When it comes to structural damage, which could be due to natural disasters and fire, you will be compensated to the extent of costs incurred to get back your house under order. For instance, in case of fire in the house due to short-circuit which you manage to control without allowing the fire to spread or damage the contents, the walls get a coat of soot in the process—the policy will pay for the paint job needed to get the interiors of your house back to its pre-fire state.

Word of caution

In your excitement of deciding the possible insurance cover for your house, do not go overboardby covering everything. Make astart by insuring the structure for its worth, not the sale value of the house. Insurers can help you arrive at this value. Next, listall the essential contents inside your house. Remember to include electrical and electronic items, as in the case of your TV or fridge, lest they become a victim of voltage fluctuation. In case of breakdown you can claim reimbursement on repairs or repayment, depending on the scope of the cover. Post listing, assign a value which is equivalent to the replacement value and not the depreciated value. The reason to go for the replaceable value is to ensure that in case of a total loss or repairs, you are able to get the right price for your possessions.

Now, if you are wondering that the cost of the policy will be very high, do not worry. For instance, if the structural value of your house is worth Rs 20 lakh and the contents worth Rs 5 lakh, an insurance policy against all perils will cost you about Rs 5,000 annually. These days, insurers also offer this policy for a block of 2-3 years, which is advisable. So, do not leave things to chance; take this policy at the first instance, especially when a financial cushion is available for your home and its prized possessions.