Personal Finance: Understanding the benefits of and the need for home insurance

For many, it’s just about buying a home, only a minuscule chunk really takes the next very crucial step — getting the home insured

Harish SharmaUpdated: Saturday, January 15, 2022, 10:46 PM IST
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Owning a home is a desire that is possessed by almost every individual, people invest their hard-earned money in buying a place they can call home, some even take loans on hefty interest just to fulfil this herculean dream. But for most people it’s just about buying a home, only a minuscule chunk really takes the next very crucial step — getting the home insured. 

Home insurance is not a very widespread concept in India, however, its importance is not at all debatable. In laymen’s terms, it is insurance that covers the house and protects the owner against the losses that occurred in a situation of any damage to the house. The policy also includes a series of protections including the destruction or damage to the house (property), its contents or the loss of valuable possessions from the house. 

Moreover, some home insurance policies also provide additional financial protection against natural calamities. So, if your house collapses in an earthquake and it’s insured, you are eligible for all the expense that goes into the maintenance work. 

In India, a lot of banks and agencies offer various home insurance policies depending on the need of the individual and the property type. They even help consumers to understand the necessity and importance of home insurance and assist them in choosing the right policy as per their requirements. 

The most common type of home insurance policy in India provides protection for the structure of the house; it is the Standard Fire and Special Perils Policy. As the name suggests this policy covers the property against fire outbreaks and natural calamities like lightning, volcanic eruptions, bush/forest fire, earthquakes, storms and floods. It also covers damages due to explosion/implosion, riots and the damages caused due to bursting or overflowing water tanks, pipes and apparatus. This kind of policy can be taken by the owner or even the tenants if they ought to live in a house for an extended duration. 

Most people think buying home insurance is a waste of money as it's a certain expenditure for an uncertain cause but what they fail to decipher is that by spending a little money they can avoid a huge financial setback. 

By buying home insurance an individual gets himself financial security because it’s just not for the structure; home insurance also covers the cost of belongings like electronics, furniture and all other priced possession. According to some new policies, one can also replace the insured items instead of getting money equivalent to its price. 

Much to your surprise, home insurance policies do not even cost a lot. Even though it may seem like an unwanted expense, the benefits yielded are way too high. For example, the insurance cost of property worth Rs 50 lakh would only be around Rs 2500 per year. Even the most comprehensive policies that cover all the components of the house can go up to Rs 5000. Above all getting the home insured lends the luxury of keeping the mind at peace. So, irrespective of what you own—an apartment, a house or a bungalow, home insurance is the way ahead. 

(The writer is the Founder & CEO of Plinthstone, a multi-speciality real estate advisory firm)

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