A diligent home insurance comparison exercise can avoid major financial setbacks in the future and ensure stability in the face of adversity.
By Devishobha Chandramouli
India is vulnerable to both natural calamities and man-made disasters. According to the National Disaster Management Authority, "58.6 per cent of the landmass is prone to earthquakes… over 40 million hectares (12%) of its land is prone to floods…; close to 5,700 kms, out of the 7,516 kms long coastline is prone to cyclones and tsunamis.... Moreover, India is also vulnerable to Chemical, Biological, Radiological and Nuclear (CBRN) emergencies and other man-made disasters."
In view of such risks, purchasing a home insurance policy to cover the loss or damage to our property is a wise decision.
Insurance companies in India sell a wide range of home insurance policies. These include insurance products such as standard fire and special perils policy, content insurance and public liability insurance. But, how would you know which is the best house insurance policy?
All you need to do is ask some questions and compare home insurance policies.
With insurance companies offering so many cheap home insurance deals, buying one requires sound deliberation.
Here are 6 reasons why you should do a thorough home insurance comparison:
1. Identify the best policy: House insurance policies and their premiums depend on factors like house structure, house size, location and home contents. Home insurance comparison helps you understand which one suits your house the best.
2. Find inclusions and exclusions: Risks covered or not covered by homeowner's insurance differ between insurance companies. Home insurance comparison helps you understand the inclusions and exclusions and find the best home insurance policy.
3. Compare insurance quotes: Going through different home insurance plans helps you compare insurance quotes and find the best home insurance deals.
4. Find the lowest premium: Home insurance comparison would help you find the amount payable as premium for different policies.
5. Assess after-purchase service and support: Offer of service and support by insurance companies after purchase of a house insurance policy is important. Reading customer reviews and feedback would reveal how supportive and responsive an insurance company is towards its clients.
6. Gauge claim-settlement ratio: The most important factor that can be evaluated from home insurance comparison is the claim-settlement ratio, that is the number of claims honoured by the company vs the number of claims denied. And when the claims are honoured, what is the turnaround time for claim settlement? The higher the claim-settlement ratio, the better.
You can do home insurance comparison both online and offline. An offline comparison would involve speaking to representatives of different insurance companies to find out which one meets your needs.
Home insurance comparison is not just about finding out the cheapest plan or the lowest premium. There is much more to it. Here is what you should do during home insurance comparison to buy the best home insurance policy.
1. Understand the jargon: Home insurance policy documents are full of jargon. Not having a basic knowledge of these special words can cause you to make a wrong decision. So, when you come across any word or phrase you don't understand, spend time to check what it means and how it would affect the scope of the insurance policy.
2. Compare the risk coverage offered: The higher the number of risks covered by a policy, the better it is. However, the type of risks to a house differs with location. So, the risk coverage offered by the house insurance policy should cover the dangers prevalent in your area. Also, keep in mind that home insurance policies offering higher risk coverage may charge higher premium.
3. Examine premium affordability: The annual premium will become a part of your future expenses once you purchase a household insurance policy. A low premium policy may not provide sufficient risk coverage, whereas a high premium policy may set you back financially. So, during home insurance comparison, pay attention to this fact as well.
4. Compare premium and deductibles: The deductible you pay has an effect on the amount you would pay as premium for your home insurance policy. So, it is useful to compare insurance premium quotes based on different deductibles. The deductible has an impact on the premium, but you need to be sure that you can afford the deductible in the event of a loss.
5. Check for replacement cost coverage/actual cash value: Many insurance companies offer contents insurance, but they only pay the actual cash value (the cost after calculating depreciation) for damaged/lost valuables. However, some insurance companies offer replacement cost coverage, where the company replaces the item at current market prices.
6. Check your credit rating: Most insurance companies often evaluate the applicant's credit reports and ratings before quoting insurance premiums. By matching your credit history to the policy requirement select the right home insurance policy and premium.
7. Calculate the discount available: Many insurance companies offer discounts when policies are bundled – for example, a combination of auto, life, and home insurance – which can add up to a substantial discount. Other factors like customer loyalty, senior citizen insurance discounts, home safety equipment will also have a significant impact on the premium payable. So, compare the discounts offered by insurance companies.
8. Study the fine print: The replacement cost of your home is not only dependent on the market value but also on the mortgage costs and the cost to rebuild the home at the current prices. Study the fine print of the home insurance policy to learn which of these are included in the policies.
Home insurance comparison can be overwhelming, but buying a home insurance plan is a must to safeguard your investment and protect you from other liabilities. If you find it difficult to do a home insurance comparison, you can take the help of an insurance agent to compare and pick the right policy.
Devishobha Chandramouli is the founder of Kidskintha — a resource hub for parents and educators.
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