Securing your home

Natural calamities are on the rise. This year has witnessed floods in Bihar, torrential rains in Maharashtra, Gujarat and Karnataka and Cyclone Amphan sweeping West Bengal and parts of Odisha. Delhi, which falls in earthquake seismic zone 4, has experienced a series of tremors. The devastation from such calamities may […]


Natural calamities are on the rise. This year has witnessed floods in Bihar, torrential rains in Maharashtra, Gujarat and Karnataka and Cyclone Amphan sweeping West Bengal and parts of Odisha. Delhi, which falls in earthquake seismic zone 4, has experienced a series of tremors. The devastation from such calamities may not only be in terms of loss of lives but damage to one’s home and belongings. While life insurance will protect a family in case of a member’s demise, what about your home and its precious belongings? Not many people know that they can insure their homes, the physical structure as well as belongings, for a low premium. One can even take insurance cover just for the structure or belongings in the house. For example, tenants may only want insurance for their valuables.

Scope of coverage

A typical householder policy consists of 10 sections, covering various risks:

Section 1: Fire and allied perils, for house building and household contents.

Section 2: Burglary and housebreak, including larceny or theft (belongings only).

Section 3: All risk against valuable items.

Section 4: Plate glass cover (fixed).

Section 5: Breakdown of domestic appliances.

Section 6: Television sets (all risks) cover.

Section 7: Pedal cycle (all risks) cover.

Section 8: Baggage.

Section 9: Personal accident insurance.

Section 10: Public liability and workman compensation risks.

As per norms, it is mandatory to include at least three to four sections in the policy, with the Section 1 (fire and allied perils) cover against household belongings compulsory. The more the sections chosen, the more comprehensive the insurance cover becomes.

Lesser-known covers

If there is any seepage in the roof or walls due to heavy rains and hailstorm or damage due to winds or storms, one can claim the repair cost from the insurance company. “Home insurance policies also cover pet veterinary costs. The terms and conditions of the same vary among companies. Many households have expensive appliances and gadgets. With home insurance plans, one can get all of these insured. Portable equipment, such as a laptop and audio-visual systems, are also protected,” says Naval Goel, CEO and founder of Jewellery kept in the bank locker or at home or even when worn is covered under home insurance.

One can buy add-ons as well, such as including escalation of property value, act of terrorism, third-party liability and loss of rent. “The escalation clause allows an automatic regular increase in the sum insured throughout the policy period,” says Sanjay Singh Chauhan, business head, SME, and home insurance, He elaborates: “If the sum insured for a building is Rs 1 crore and a client opts for 10 per cent escalation cover, the escalation sum insured comes to be Rs 10 lakh. This will increase on a per day basis. So, in case of a claim after, say, six months, the escalation sum insured would be calculated as Rs 493,151 (180/ 365*10,00,000). The final sum insured under the policy at the time of claim (six months) will be Rs 10,493,151.”

Since the cost of the structure may rise as the years go by, the escalation clause protects against underinsurance at the time of claim. On third-party liability, Chauhan says: “It covers the amount the insured becomes legally liable to pay, including litigation expenses. Any loss or damage due to terrorism will be covered only as an add-on.” One can also buy ‘loss of rent’ cover, under which the insurance company pays rent for the policyholder to live elsewhere while the damaged house is being reconstructed.


The most important exclusion is natural wear and tear. “All household appliances and furniture come with limited life. For example, your old AC will eventually stop working, and you cannot make a claim for it because it has lived its life,” says T.A. Ramalingam, chief technical officer, Bajaj Allianz General Insurance.

Deliberate damage to insured belongings is also not covered. “Identifying a genuine claim in this case would be hard, but a smart surveyor will ask all the right questions to figure it out,” says Ramalingam.

Theft/ burglary by regulars to the house, such as a maid or driver, is not covered as such individuals would be having access to the house. “Under the Indian Penal Code, burglary, theft and larceny are defined separately. Larceny is when the person who has committed it has permission to enter your house otherwise. So you can include it in your policy as an add-on,” says Ramalingam.

How much insurance to buy

Although the policy tenure for most home insurance policies is one year, you can buy a long-term plan to cover the structure. It is critical to calculate an adequate sum insured to avoid underinsurance at the time of claim. For example, if the value of your house is Rs 10 lakh and you have taken an insurance of Rs 6 lakh, which is 60 per cent of the actual cost, the insurer will pay you 60 per cent of Rs 6 lakh, that is, Rs 3.24 lakh.

There are three ways to calculate the value of the structure of the house:

1) Market value: The insurer will pay the amount the policyholder would have received on selling the house at that point in time. It factors in depreciation.

2) Reinstatement value: The house will be valued on the basis of the total cost required to reconstruct it. The land value of the house is not included.

3) Agreed value: A few insurance companies provide cover on the basis of agreed value. It factors in both the land value and cost of construction. In the event of a loss, the insurer pays the ‘agreed value’ and takes ownership of the house.

“A policy on reinstatement value basis would provide better compensation than one on market value. Not all companies offer agreed value basis cover,” says Adarsh Agarwal, appointed actuary at Digit General Insurance.

Bajaj Allianz does have the agreed value option. “Usually insurers pay the construction cost after the house has been built. However, in agreed value basis, we pay the full amount upfront after you have handed over the property papers, so that we become the owner of that property,” says Ramalingam.

How to buy a home insurance policy

Buying a home insurance policy is complex as people get confused with the calculations of assets and contents of their homes. But now, one can buy the policy online since valuation is not a prerequisite. “At Digit Insurance, we ask the customer only two primary questions, total square area of the house and location. Based on this, we suggest a sum insured. This eases confusion for the customer,” says Agarwal.

At Bajaj Allianz, if the aggregate amount for losses to belongings crosses Rs 5 lakh, one will not need to provide any individual break-up of items. However, at the time of filing a claim, the insurer will conduct an evaluation and ask for all relevant documents.

Insurance penetration is low in India and home insurance is hardly on anyone’s agenda. While a home insurance policy cannot prevent unwarranted damage to your house or its belongings, it will certainly protect your pocket if that happens.

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