Insuring your house is as important as purchasing one

The importance of an HOI can be understood through the case study of Sumit Gupta who lives in Jamshedpur

Homeowners Insurance (HOI) is a safety net that provides protection against any kind of loss that might occur to ones home,its contents or loss of other personal possessions of the homeowner. It also provides liability insurance for accidents that may happen at the home.

The concept of insurance is not very popular in India and not surprisingly homeowners insurance is not very common either. But with prices of residential properties shooting up,HOI is gaining popularity and insurers are offering additional features as well.

The twin disaster of an earthquake and tsunami in Japan,that destroyed thousands of houses and left millions homeless has also highlighted the significance and necessity of such a policy.

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The importance of an HOI can be understood through the case study of Sumit Gupta who lives in Jamshedpur. He bought a small apartment at the heart of the city at a cost of Rs 35 lakh. He had paid Rs 15 lakhs from his savings and the rest Rs 20 lakhs was on finance from his bank.

When he bought a Home Insurance for the property,he had the choice of covering only the building structure or the contents or both. He chose to cover both the structure and contents of his house,including valuables such as electronics and gold. The policy covered the losses to the structure and contents of his home due to any natural disasters like fire or earthquake and eventualities such as burglary and theft.

Protection from calamities of flood and war are usually not covered under HOI but can be taken separately by buying a flood insurance policy. Also,certain items like cash,expensive jewelry over a certain value,glass items,etc are not covered under HOI.

So,if his house is destroyed wholly or partially for any reason covered by the policy then Gupta would be compensated for the loss. In case,only the structure or the contents are destroyed,then a valuation of the loss would be done before the claim is paid.

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So Gupta made a very sensible choice by insuring his house and contents as his investment would be safe in case of any accident or calamity.

The cost of homeowner’s insurance usually depends on the valuation of the house and its contents and the additional riders are attached to the policy. Accordingly,if the property price rises every year,then the valuation and the premium for the HOI would also increase.

There are many HOI policies available with various additional benefits. For instance,some insurers provide an additional terrorism benefit which is usually excluded or give a discount for long term policies. Others provide a comprehensive cover or give a basket of coverage to choose from.

The author is the CEO of MyInsuranceClub.com,an insurance price and features comparison site in India. Readers may write to him at deepakmyinsuranceclub.com