Top Questions To Ask When Buying A Home Insurance Policy
To choose the right house insurance policy from the many available can be confusing. But, asking these 10 questions can help you pick the best home insurance policy.
By Devishobha Chandramouli
In September 2018, it started innocently enough in Kerala. The rain first brought cheer. But then, the incessant downpour gave rise to panic and mayhem. The degree of devastation was appalling. Flood caused by the heavy rain damaged thousands of houses.
For the scale of destruction, Kerala was back on its feet fairly quickly. But, together with the indomitable spirit of Keralites, there was another reason for this fast turnaround – home insurance.
Many newspaper reports citing insurance companies stated that house insurance claims between Rs 600 to 1,000 crore were filed and dispensed.
Household insurance: It is important
Home insurance has moved on from being a ‘nice-to-have’ feature to a necessity. With the risk of natural calamities and man-made disasters being high in India, most homeowners are now willing to buy a household insurance policy.
Although, legally, it is not a must to buy a house insurance policy, there are many advantages to buying one. A standard homeowners’ policy covers damage to the building structure and its contents like household items. And, add-on covers like loss of rent cover, public liability cover, key and lock replacement cover provide extra protection.
Home insurance: Buying a homeowners policy
Reading and understanding a home insurance policy document isn’t interesting or easy. The complicated language and jargon used can leave you thoroughly confused. So, before you read a home insurance plan, here are a few terms you should be familiar with:
- Accidental damage: Any unintentional or unexpected damage (caused to the home or its contents)
- An act of god: Damage caused by natural causes (which can't be averted through preventive measures)
- Building: The structure of the home and other related structures such as the garage or outhouse.
- Exclusions: All the risks not covered by the home insurance policy
- Force majeure: Natural/unavoidable events that may prevent the insurance company from fulfilling its obligations
- No claims bonus: A discount that is offered when the policyholder doesn't raise any claim on home insurance
- Pro rata rates/pro rata basis: Assigning an amount to the insured based on his share in the whole
- Period of cover: The period between the start and end of the home insurance plan
- Policyholder: The individual to whom the insurance policy is issued; the policyholder is also the beneficiary
House insurance policy: Questions to ask the insurance agent
Now that you are familiar with the frequently used terms in household insurance plan documents, it is time to be prepared with questions. Here are 10 questions you should ask the insurance agent before you buy a home insurance policy:
1. Based on my home's location, what kind of risk coverage do I need?
The type of coverage you need depends on the type of risks your home is susceptible to. For example, if your home is close to a flood- or an earthquake-prone area, it counts as a risk. So, your home insurance policy premium is calculated based on the type of risk your house is exposed to. Similarly, proximity to risk-protection locations, like being close to the fire station, can reduce the insurance premium payable.
2. What are the exclusions in the homeowners’ policy?
There is a list of risks/problems that home insurance policies do not cover. So, ask the insurance agent to list the perils not covered by the home insurance policy. Knowledge of exclusions will help you decide if you want to purchase any add-on cover.
3. What kind of protection does the policy provide to tenant-occupied houses?
If you have a house that is occupied by a tenant, asking this question is very important. As a landlord, you should know what kind of property damage by a tenant is covered by the homeowners insurance policy.
4. My house is damaged and becomes uninhabitable, and I need alternative accommodation. Will my rental expense be covered?
Unfortunately, if your house becomes uninhabitable due to damage, you would need to temporarily move to another house. Ask the insurance agent, if the home insurance plan would cover the rent of the alternative accommodation. Your insurance agent can help you avail the plan/optional cover which will pay for temporary relocation.
5. How can I avail the maximum discount on the insurance premium?
The premium of a house insurance policy depends on several factors like the size, location and risk exposure of the house. However, certain factors can reduce the premium payable on any household insurance. Some of these are, home with security systems, smoke detectors, dead-bolt locks, fire extinguishers, security guard, and proximity to police and fire stations have a great impact on your premium rates. Also, excluding items that have low monetary value, for example, an old television set, helps reduce the premium payable. Experts also recommend bundling of premium (take two or more policy covers) to reduce the insurance payable. Agreeing to share the burden of repairs with the insurance company also reduces the premium payable on any policy cover.
6. Which natural and man-made disasters are covered by the insurance policy?
Home insurance policies are meant to cover losses from both natural and man-made mishaps. Reading the policy helps you understand the risks covered and those that aren't. For example, an insurance policy may cover thefts, burglaries and riots, but not terrorist attacks. So, together with reading the fine print, ask the insurance agent about inclusions and exclusions.
7. If I sell my house before the lapse of the policy, what happens to the premium?
As soon as the ownership of the house changes, the household insurance policy stands cancelled. The premium for the remaining period is refunded to the insured. Ask the agent, how much time it would take to receive the refund, and if there will be any deductions from the amount.
8. What is the process for filing a claim?
It’s important to be clear about the claim filing process. So, get a clear idea of the deadline for filing the claim after a mishap; how to notify the insurance company, through an email or SMS or registered post; the cases in which you may need to file an FIR with the police to make a claim; the reports and certificates required for filing a claim; how to submit invoices and bills; and how long it takes for claim settlement. Most importantly, ask about the grounds for house insurance claim rejection and what can be done in that case.
9. How much cover should I opt for?
The sum insured in a homeowners policy is usually the cost of rebuilding the house at current construction costs. Keeping in mind various factors like the number of rooms, materials used for construction, style of the house, the contents, the effect of inflation on all these and so on, come up with a rough estimate of how much it would cost to rebuild your house.
10. What add-on cover options should I purchase?
Your insurance agent should be able to tell you the suitable additional policy covers you should also buy. Additional coverage can include third party liability protection, coverage of living expenses while coping with the loss of property, and so on.
A home is not just a structure with walls, but a space filled with memories and emotions. Though no home insurance cover can compensate for the lost memories and ruffled emotions, financial recovery can help cushion the loss. The responsibility of protecting your home deserves to be only in the best hands. Choose wisely.
Devishobha Chandramouli is the founder of Kidskintha — a resource hub for parents and educators.
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