From fire to floods – Why home insurance is something you should not ignore

• Home Insurance protects one’s home from any unforeseen circumstances such as fire, theft, and natural calamities like earthquakes, floods, and storms.
• For individual homeowners, it is recommended to choose comprehensive coverage.
• Homeowners can boost their standard home insurance policies with add-on options.

Scary as it may sound, with climate change now a reality, all our cities are likely to experience devastating floods. We have seen it in Mumbai, in Chennai, in Bangalore, and very recently in Himachal and Uttarakhand. Let us take the case of Mumbai. Studies suggest that high rainfall, rising sea levels and sinking land expose more people to the risk of floods. Moreover, there are other natural calamities that may occur too and add to that the risk of theft and burglary.

This makes home insurance very essential for anyone who owns a property, or even those who stay in rented accommodation where one can insure the contents of the house against various risks.

“Home insurance is a type of property insurance that protects one’s home from any unforeseen circumstances such as fire, theft, and natural calamities like earthquakes, floods, and storms. It also covers the damage caused due to water-logging due to floods,” says Vivek Chaturvedi, CMO and head of direct sales, Digit Insurance.

Home insurance in India is abysmally low

Home insurance penetration in India is very very low. Data from The Asia Insurance Review revealed that home insurance in India stood at only 1% five years back. In contrast, countries like the US, UK, France and Australia have home insurance rates ranging from 90% to 97%.

There are a couple of reasons for it. “One is the perception that nothing will happen to me and I do not need home insurance. The second is related to the lack of knowledge of new products, that one can insure both the building and the content,” says Gurdeep Singh Batra, national head, retail non-motor underwriting and coinsurance, Bajaj Allianz General Insurance.

Also, home insurance in India is not mandatory. While it is also not legally mandatory in the United States, the United Kingdom, or Canada, many mortgage lenders in these countries often require borrowers to have home insurance as a condition of the mortgage loan.

This requirement is to protect the lender's financial interest in the property. While it's not a legal obligation for homeowners, it is a practical necessity to secure coverage to safeguard their homes, personal belongings, and liability in unforeseen circumstances while satisfying lender requirements. We look at why home insurance is important and what it covers.

What is covered under home insurance

Under home insurance, there are three kinds of cover available.

Building-Only Cover

: This type protects the physical structure of the building, including the net usable area (carpet area). It excludes external walls, service shafts, balconies, verandahs, and open terrace areas but includes internal partition walls within the residential unit.

Content-Only Cover

: This option covers personal belongings inside the house that aren't permanently attached to the structure, such as furniture, electronics, and kitchen equipment.

Comprehensive Cover: This provides complete protection for both the building and its contents. It often includes additional options like coverage for equipment breakdown and burglary. Individuals can choose the option that suits their specific needs and circumstances.

Insure your home according to your needs

For individual homeowners, it is recommended to choose comprehensive coverage because it provides protection for both the building and the contents of the house. If you own a flat within an apartment complex, it is typically the responsibility of the housing society to insure the structure itself. In this case, the flat owner would only need to insure the personal contents within their home. “In case the building isn’t insured, then one can buy a cover individually as well to protect the structures of their flat,” says Chaturvedi.

If you're a tenant residing in an apartment or a standalone house, you might want to focus solely on obtaining 'content-only' insurance coverage.This type of insurance safeguards all your possessions within the dwelling. “It could be a wise idea for landlords who have let-out properties to consider landlords' insurance, which covers damage to the building as well as loss of rent,” says Mathur.

Add-ons to boost your home insurance

“Protecting your home with a comprehensive home insurance policy coupled with tailored add-ons is the most sensible and prudent thing to do,” says Tarun Mathur, CBO - General Insurance, Policybazaar.com.

"Theft and Burglary Cover" protects against losses not typically covered by standard policies, such as theft of valuable items like gold and electronics. "Gold and Jewelry Add-On" extends coverage to include precious metals and offers significant protection.

"Portable Electronic Items Add-On" is essential, covering devices like laptops and phones that may not be included in standard policies. In the event of home damage, "Alternate Accommodation Add-On" eases the burden by covering the cost of temporary housing during repairs.

For added security, "New-for-Old Cover" ensures valuable items are replaced with new ones, rather than reimbursed at their depreciated value.

Low premiums

Interestingly home insurance premiums are low and are very manageable. Home insurance premiums vary based on factors like property value and coverage.

“ The premium for home insurance lies between 0.10 per thousand to 0.25 per thousand sum insured,” says Batra. You can get a ₹ 1 crore sum assured for as low as ₹2,500 per year and ₹25,000 for a 10-year period. Comprehensive plans with added features will cost you more. It's essential to obtain quotes from different insurers to find the best policy that suits your specific needs and budget.