Home insurance and its application to independent houses and flats

We cover here the basics of home insurance and see how it is applied to independent houses or flats inside a society.

The standard home insurance from most of the insurance providers does not cover fire and other perils like earthquake, flood, storm etc. It would generally cover against the loss or theft of valuables and contents that one owns inside the house.
However, there are many home insurance providers that are now growingly including the cover of natural calamities in their basic scheme for home insurance.
Such an insurance scheme covers the house against natural and man-made calamities and covers both the contents and the house reinstatement (re-construction) cost.

The house re-construction cost against which the house will be covered is reached at in advance. The same is derived by the total area of house multiplied by the construction cost.
The owner has to choose the potential house re-construction cost. The more he chooses as the cost, the more premium he/she has to pay.
So, while applying for home loan, the owner needs to provide the house construction cost and area along with the standard of valuables and contents inside the house.
The premium for the policy is arrived at accordingly.
For a house with re-construction cost of around Rs. 50 lakhs and content worth Rs. 10 lakh, the premium would come to Rs. 4000 approximately.

The policy can be taken as a long term policy (for 5 years or more) or as a policy with yearly renewal required.
Benefit of yearly renewal is that the owner has an option to reset the construction cost any and every time before yearly renewal.
For long term policy however, insurance providers give hefty discounts ranging from 20% to 60%.

Now if your house is not on your own land but is a flat or a floor as part of a building, you would still be covered for re-construction as per your flat’s size. The common area and other flats will not be covered in this case.
However, for a building inside a society, it is generally the RWA or society group that comes together to insure at least the common areas like corridors, stairs, lifts, parking etc.
In fact, in many cases of ageing societies in Mumbai, the RWA has taken home insurance for entire building including common area and re-construction cost for all flats and in turn asks the flat owner to pay RWA for the same. Since its a bulk deal for insurance provider, a reasonable discount is provided that gets passed on to the flat owners.

Many associations in Gurgaon like the DLF RWA(s) have also adopted complete home insurance for the building thereby. In Noida and Ghaziabad however, this is still the most neglected aspect. This should be high on agenda for RWA once formed (in UP for instance, the builder is absolved of defects after 2 years. Hence, the home insurance shall be taken at least soon after that).

With a spike in natural calamities in recent times, the home insurance is finding favor among home owners especially the flat owners and the increased awareness is only going to ensure a peace of mind.
Home insurance could definitely save one’s costliest asset.

Comments/Feedback invited.

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Last Updated on May 30, 2015 by Go4Reviews