Home insurance? 6 key points to note

Awareness about home insurance plans in India is very low, compared with the global picture. Only of late has some interest caught on among home owners for the need to seek risk cover.

While this has largely been brought about by demands from banks offering home loans, bankers have failed to educate home borrowers to insure their properties at the reinstatement value rather than the market value.

The way to go about it is to insure your property not as per the value of the house deed, but seek the value of the policy cover based on the size of the flat, taking into account the super built-up area.

The current going rate for construction in Mumbai city varies between Rs 800-1,200 per square foot, and increases to Rs 1,400 per square foot in flats with marble or granite flooring.

Many covers are available in the market today designed to protect one's home and the contents from at least ten risks.

So why seek cover only if you have taken a loan. You are better off purchasing a householder's insurance policy today before a disaster strikes, and one only then realises the need for taking a risk cover.

While you are purchasing full protection in the form of a the risk cover, bear in mind the following 6 key points which will also give you peace of mind.

You should be sure of the coverage you are getting under the plan, and not be taken by surprise to find out that the cover carries exclusions you had least expected. Chiefly the cover ought to include the structure of your house, your belongings, your liability to others and your living expenses if you're forced out. Should a disaster strike, you need to be in a position to rebuild your home and replace everything in it.
To reiterate, you should go for replacement value insurance. You want to be able to replace everything you lost with similar, new items. And make sure that your policy spells out that both your home and its contents are covered by replacement-value insurance.
Be aware of the claims process. Two policies could promise the same amount of coverage, but they can be vastly different when it comes to making you whole after a loss. One has to ascertain that one receives the entire claim upfront, and not just a fraction. Further be sure that the company will pay you for all the things you have lost and not just those you replace.
Take inventory. Filing a claim involves two steps -- proving you owned certain items and verifying their worth. This is a lot easier to do when you still have your things. Some companies advise their clients to go through their homes with a video camera, walking through each room, and doing a quick sweep, so that you get everything you own on tape. Else make a list and shoot a few rolls of film. Keep the video or photos in safe custody, preferably not at home where it might go up in smoke should disaster strike.
Keep pace with inflation. With inflation today at over seven per cent in India, it is important to keep pace with the same and replace the cost of cover from what you paid a couple of years back. Many companies overseas have inflation guard, which covers the increasing cost of rebuilding. Hence when your cover comes up for renewal, ensure the amount of cover taken is realistic. Especially when you have made improvements in your home.
Considering that many places in India are prone to catastrophes like flood and earthquake, ideally your cover should include the same.

Under cover

Losses that arise due to fire, lightning, explosion, aircraft damage, impact damage from rail/road vehicle or animal, riot, strike, malicious and terrorist damage, storm, flood.

The sum insured (value denoted for insurance) can be either on reinstatement value, which is the value for replacing the item with a new item of same type and make or market value basis, which is the reinstatement value less depreciation depending on the age of the item.

Wall units and similar furniture, which are fixed furniture, can be included in the sum insured, if the building is insured.

The policy excludes 5 per cent of the claim amount for each and every claim arising out of Act of God perils.

Burglary and robberies are covered.

You can insure your computer, TV, and DVD player against all risks of damage and breakdown, by providing their values where the sum insured is on reinstatement value basis.

Do not insure any item more than 10 years old

Avoid inclusion of items where the manufacturer or supplier is responsible for loss or damage