Is Your Home Insurance Right Fit For Your Property? Find Out!
Is Your Home Insurance Right Fit For Your Property? Find Out!
Published on March 25, 2021. EST READ TIME: 2 minutes
![Is Your Home Insurance Right Fit For Your Property? Find Out! Is Your Home Insurance Right Fit For Your Property? Find Out!](/images/default-source/default-album/ergo-home_2ced44e9b2ed9406faeccbc62f37e2d5c.jpg)
Home is not just a place to live, but one of the biggest investments in life. However, homes situated in natural calamity prone zones such as Mumbai, are susceptible to get damaged. Sometimes, a natural calamity like floods can damage the house to such an extent that the homeowner has to pay a humongous amount for rebuilding and repair. However, with home insurance in place, homeowners get financial security against damages to their home due to natural or man-made disasters, fire, explosion, theft, etc. Now the question is does your home cover depend on whether you own a flat or an independent house? The answer is yes.
Flat vs Independent Home: Choosing the Right Home Insurance
Sometimes, it can be confusing for homeowners to select the right home insurance as these insurance products come with different policies. However, a homeowner should first consider what kind of property he owns. Is it a flat or an independent house? The next question should be if it’s an individual property or a Resident Welfare Association (RWA) property.
If it’s a RWA property, then the homeowner can rely on RWA-purchased home insurance. However, it is a good idea to buy an all-risk policy that covers the content of the home for a longer tenure.
If it’s an individual property, the homeowner should opt for individual home insurance. This policy has two variants, each suitable for either a flat or an individual home.
Individual Home Insurance for Individual Homes
If a homeowner wishes to protect his property against natural disasters, he should definitely opt for the “reinstatement value” insurance variant. This individual home insurance variant covers the entire cost of construction of the property. In case of property loss, such as damages to the content of the home, the insurer is liable to replace the damaged item with a new one. The newly replaced item will be equal to but not better than the item that is damaged.
Usually, the insurance company has a chart for the cost of construction and the settlement claim is based on it. The insurer will typically pay out the sum in parts as the construction proceeds. The added advantage of the “reinstatement value” variant is that the insurer offers a clause to the policyholder, in which he can choose to increase the assured sum by a predetermined percentage.
For example, if the reconstruction cost is ₹25 lakh and the policyholder chooses 20% escalation, the insurer will payout ₹30 lakh.
Individual Home Insurance For Flats
Another individual home insurance variant is “Agreed Value”. Under such home insurance, the insurer is liable to pay the value already agreed upon. The agreed value is an agreed sum assured, mutually decided by the insurer and the policyholder while finalising the home insurance.
After receiving the assured sum, the homeowner has the choice to either repair/rebuild the house or buy a new one. However, if the homeowner buys a new home with the money, then he has to transfer the title of the insured home to the insurance company. One of the benefits of the “Agreed Value” variant is that the sum assured is higher than the reinstatement value cover.
A Third Option
Some insurance companies may also offer a third-variant - an indemnity cover. Under this insurance, the insurer is liable to pay compensation for the damaged item after deducting for the wear & tear it had before getting damaged.
Conclusion
Buying home insurance is a wise choice, especially for those living in natural disaster susceptible areas such as Delhi NCR, which faced 14+ earthquakes in 2020. No matter which property you own, buying home insurance can sometimes be confusing. Some insurers offer covers against terrorism while others do not. Similarly, some policies may offer cover against damages due to cyclones but not against flooding. Therefore, it is always wise to look at the exclusions and terms & conditions before purchasing a home insurance cover.
Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.