Protecting your dream home with insurance from calamities

Your home is undoubtedly the place where you feel relaxed and secure. Irrespective of whether it is a palatial bungalow or a small apartment in a society, it would always be 'Home Sweet Home'. To protect this home and all of its belongings from unpredictable risks, a home insurance policy is an ideal solution.

Home Insurance: Why is it needed?

A single disaster such as the recent Japanese tsunami, could reduce all that you have to ashes or rumbles in minutes. Not only does it emotionally affect you, financially too it is a great loss.

A home insurance covers losses arising out of such natural or man-made calamities, to the structure, or to the contents of your home. For a small amount of premium, it offers protection against the financial losses to your home or to your precious belongings. It ensures you have the money to rebuild your home and lives.

There are many variants and choices offered by insurance companies to protect your home. Plans are available to cover only the structure, or only belongings, or as a combination of both.

a) Building structure insurance

This offers cover against losses due to fire, riots, explosions, earthquakes etc... that cause damages to the basic structure of the home. For such kind of insurance, cover does not consider the market value of the home. Only cost of construction of the building is covered.

b) Home contents insurance

This coverage protects against loss or damage to the contents inside the home, such as jewellery, clothing, expensive furniture, electronic goods etc. Claims are paid out on the cost of purchasing a similar item after exempting it's depreciating value.

c) Householders insurance policy

This is a comprehensive insurance policy that protects your home as well as the various contents inside it. It is a single policy that takes care of a number of contingencies.

Most home insurance providers offer plans that are flexible and let you choose what coverage you need. The calamities covered depend on the plan you choose. Here are some of the contingencies insurers generally offer cover for.

For insurance of building structure:

• Fire
• Earthquake
• Subsidence, landslides and rockslides
• Leakage from automatic sprinkler installations
• Riot, strike & malicious damage
• Explosion & implosion
• Damage due to impact by vehicles
• Missile testing operation
• Lightning
• Storm, cyclone, tempest, tornado, hurricane, flood & inundation
• Aircraft damage
• Bursting and/or overflowing of water tanks, apparatus and pipes

For insurance inside home

• Fire
• Home Burglary( damage or loss caused by theft or burglary in residential premises)
• Loss of jewelry, silver articles, gold ornaments and precious stones

For the purpose of calculation of the insurance amount and the premium to be paid, an assessment procedure is carried out.

The common factors considered in the calculation are area of house, location of property, approximate rate of construction.

A common thumb rule followed to estimate this is area of the house multiplied by the rate of construction per sq feet. For domestic appliances, cover is based on their market value (after considering depreciation of the appliance).

A fixed quote for the sum assured for each household item is provided at the time of buying the policy.

Of course, similar to other insurance policies, home insurance comes with its share of exclusions too. Some of the typical exclusions are as follows:

• Loss or damage caused by domestic staff's involvement in a burglary
• Loss or damage of livestock, securities for money, bullion, deeds, bonds, share certificates, manuscripts, motor vehicles, business books, documents of any kind, promissory notes and the likes, are not generally covered, unless explicitly mentioned
• Illegally acquired properties are not covered
• A home which is unoccupied, for a period of more than 30 days consecutively, where in the insurer has not been informed about the same
• Homes used for commercial activities such as conducting coaching classes, arts, music classes etc are not covered
• No cover for damages that result out of natural wear and tear
• No building insurance cover for houses over 50 years old
• Electronic items more than 10 years old are not covered under content insurance
• No cover for damages caused by terrorist attacks

You would need to read the fine print before signing the offer document to understand what is and is not covered