What Is Homeowners Insurance? Who Needs One?

Posted on: Apr 5, 2024 | 3 mins | Written by: HDFC ERGO Team

What Is Homeowners Insurance? Who Needs One?

A home is a place which provides you shelter from the elements of nature, and owning it requires a significant amount of investment. But unexpected events, such as natural calamities like floods and earthquakes, and other events like theft, fire and malicious activities, pose significant risks to your home. Damage to your property or its contents can be a substantial financial blow in terms of expenses for repair and renovation. Home insurance or property insurance protects you from the financial losses incurred due to damage to your home from natural calamities and man-made disasters.

What is Homeowners Insurance?

Owning a home is a significant investment, and any damage to your home incurs heavy financial losses. Homeowners insurance is a form of insurance designed to protect homeowners from financial expenditures or losses due to damage or destruction of their property and personal belongings. Depending upon the coverage you select, it covers a large variety of situations ranging from fire, theft, vandalism, and natural disasters, as well as liabilities for accidents that occur due to the property.

How does Homeowners Insurance Work?

Homeowners insurance works like typical insurance and provides monetary protection against covered problems, usually through property and liability coverage. Like all other policies, when you buy a homeowner insurance policy, you pay a premium to the insurance company and get coverage for your selected policy. In case of any events covered in the policy, you can file a claim with the policy provider. The insurance company will then assess the damage and estimate the loss. If approved, they will provide the compensation amount up to the limits specified in the policy to repair or replace the property or belongings, which were damaged.

Is Homeowners Insurance Required?

It is not mandatory under the law to have homeowners insurance in India. But it may be wise to have this insurance depending upon the dangers faced in your region. For example, many places are prone to natural disasters like floods, earthquakes and cyclones; there are also incidents of fire, thefts or burglaries, and vandalism by miscreants. All of these factors need to be considered before buying the insurance. Hence, buy an insurance policy to get coverage for Fire Accidents, thefts and burglaries, natural calamities, Man-made hazards, and damage to belongings.

Different Homeowners Insurance Coverages:

1. Bharat Griha Raksha

Bharat Griha Raksha is the home insurance policy which is made compulsory by the Insurance Regulatory and Development Authority of India (IRDAI) for every insurance provider to offer. It is an insurance cover that provides coverage against loss, damage or destruction of the home building and its contents against the risk of fire, earthquake, flood and other similar incidents. In addition, the valuable contents of the house can also be covered, under Bharat Griha Raksha for up to 5 lakhs of Sum insured.

Key Features:

• Protection for your property & its contents for 10 years

• Waiver of under-insurance

• Auto escalation @10% every year

• Insurance on Market value either for building or content is not permitted.

In-built add-ons:

• Terrorism

• Rent for alternate accommodation

• Architect, surveyor and consultant engineer fee up to 5% of the claim amount

• Debris removal clearance – up to 2% of the claim amount

2. Home Shield Insurance

Home Shield Insurance provides extensive cover for your property for up to 5 years from almost all unexpected events, which might cause unnecessary stress for you. This home insurance covers the actual value of the property as given in the registration agreement of the property. It also has multiple optional covers to meet your distinctive needs.

The Optional Covers include:

• Escalation Option for building- automatic escalation of up to 10% on base insured sum throughout the policy.

• Expenses of Shifting Residences- This covers the expenses incurred for packing and moving the insured possessions to alternate accommodation.

• Emergency Purchases- It covers expenses of emergency purchases by the insured.

• Electrical Failure- Provides coverage for damage due to short circuit.

• Equipment and Valuable Cover- This covers the loss or damage of your valuables and equipment.

• Public liability- It provides coverage in case of injury or damage to a third party due to your house.

Homeowners Insurance vs. Home Warranty

Both homeowners insurance and home warranty offer coverage for homeowners. However, they serve different purposes:

Homeowners Insurance mainly focuses on the damage to your property and belongings caused by natural calamities and artificial factors. It also covers any liabilities that may occur due to your property. It is essential for protecting your home and provides financial security against damage caused due to untoward events.

However, home warranties are generally service contracts that cover the repair, maintenance and replacement of major home systems and appliances due to general wear and tear. Usually, they do not cover damage due to disasters or accidents but only reduce the expenses of functioning of such items which are covered under the warranty.

Conclusion

Homeowners insurance is an integral part of stress-free and responsible homeownership. It offers a safeguard against a wide range of risks from natural and artificial causes, which could otherwise cause a great deal of financial losses.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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