Your home is definitely your most valuable investment, and you’d never want to come across an incident that damages it and leads to other losses when you don’t have enough savings to repair it or buy/rent a new home. A homeowners insurance policy seeks to cover you financially whenever there’s damage to your property and you have incurred minor to severe losses.
In this context, we will take a look at what a homeowners insurance policy is and how it works.
What is meant by a Homeowners Insurance policy?
A homeowners insurance plan will cover damage to your home, property, personal assets, and other valuable belongings in your home. It also includes any injuries you could get on your property and any accidental injuries you might cause to anyone outside of it, for which you could be held accountable.
Let’s now take a look at how a homeowners insurance policy works.
What does a Home Insurance Policy Cover?
Your chosen home insurance policy will typically cover a variety of risks. The hazards can be broadly divided into two categories: loss or damage to your home’s belongings and loss or damage to the house’s structure.
They can be further classified as:
Loss or damage to the structure of your house because of natural calamities like earthquakes, floods, lightning, storms, cyclones, landslides, tornados, hurricanes, and so on, and also damage owing to man-made calamities like riots, strikes, and vandalism. Moreover, a homeowners’ insurance policy also seeks to cover damage or loss due to aircraft damage, missile testing, any form of explosion/implosion, overflowing of water tanks, bursting of pipes, leakage from sprinklers, inundations, and so on.
Loss or damage to its contents because of terrorism, burglary, robbery, or theft, among other things.
However, there are a few exclusions that should be considered before you opt for a homeowners’ insurance policy. These include willful destruction, electrical and mechanical breakdown, losses owing to the house being unoccupied for a certain period of time (30-60 days), loss or damage because of the insured’s domestic help, even in the event of that domestic help being directly or indirectly involved in the attempted or actual theft or burglary, and bullion, cash, or works of art.
Every home insurance policy from a certain insurance company comes with a set of exclusions that you need to keep in mind before buying it for the protection of your most valuable investment, i.e., your house.
How Much Should you be Insuring your House for?
The cost that your house is going to be insured for, is based on a concept known as “Reinstatement Value.” This generally means the cost involved in reconstructing your house the way it presently is.
Although market rates are not considered for this purpose which might make you think about how a home insurance policy works, the cost of construction is also dependent on the location of your property. If it is situated in a high crime rate neighborhood, the price will increase significantly!
Another way to calculate the value of your house is known as “Indemnity Basis.” Under this, the cost calculated as per the Reinstatement Value gets reduced by the depreciation on the flat. Nevertheless, this method of calculation doesn’t benefit the homeowner in any way, and he/she needs to choose a policy that doesn’t make use of this method to calculate the value of the property.
Finally, some insurance companies also consider the cost of the house on an agreed-upon value basis. This is calculated based on the total area of the property mentioned in the registered sale agreement and the value per square foot according to the Government’s Ready Reckoner.
The insured value for the cost of your home’s contents is going to be based on the replacement value of every item that’s insured. It is the duty of you, i.e., the insured, to make a thorough and exhaustive list of items that are required to be insured. However, the coverage for jewelry shall depend on each insurance company and its offerings.
How can you Make a Claim?
Probably the most important part of your homeowners’ insurance policy is knowing how to make a claim. Most insurers have their own specific ways on how you can raise a claim.
Once you come across any damage done to your property, you, as the insured, should immediately inform the insurance company.
The insurance company will then send a surveyor to your site to assess the extent of the damage. Once the surveyor has completed filing a site report, you will be required to submit the necessary documents supporting the claim to the insurance company.
The insurance company will then process every document and the claim you’ve made will be accepted or rejected as the case stands finally.
A home insurance policy is definitely one of the best decisions you can make to ensure the proper safety of your property. Hence, be sure to insure your valuable home today.
Is Homeowners’ Insurance Mandatory?
No, a homeowners insurance policy isn’t mandatory in India like an automobile insurance policy. However, in case you’re financing your home, mortgage lenders will tend to have a vested interest in it, and they will generally require you to possess a homeowners insurance policy in place.
Even when you have paid your entire mortgage amount, your home will still arguably be your most valuable asset. Hence, you’ll always choose to protect it.
A homeowners insurance policy not only safeguards your home and property but may also seek to cover you in the event of someone suing you for accidental injuries.
As a result, it is proven to be a must-have in any way.
How long are Homeowners Insurance Policies in effect?
Most of the policies stay in effect for 12 months and renew annually. You should always consult the insurance company regarding their renewal procedure, and for how long your chosen plan will stay in effect.
Do you need Homeowners Insurance for a Rental Property?
If you have rental properties and tenants, you will certainly require a landlord insurance policy to safeguard your property and offer liable coverage just like every other home insurance policy.
Final Words
A homeowners insurance policy will typically cover your dwelling, other relevant structures on your personal liability, property, medical payments to third parties, personal property, and loss of use costs.
Payments for the damages on your property will depend on if a covered peril caused your loss, and the homeowners insurance limits on your coverage.
