Protecting your home

Floods, cyclones and earthquakes are not common. Neither do they come with an announcement. Yet, such natural calamities occur frequently in our country. The financial losses that one incurs in the aftermath of such calamities can be quite devastating. Recent episodes of cyclone in Chennai and the impact of the 2016 earthquake in Nepal, which also left several parts of UP and Bihar affected, are still fresh. Damage to one’s house due to a calamity can be very shocking, especially because a house is something that most of us build or buy with great sacrifices.

Add the emotional angle, and you will agree how difficult it could be to come to terms with damage to one’s house. Although there is a very efficient financial tool that can safeguard the financial implications of calamities to one’s house—there are very few home owners who take home insurance. Not only does this policy cover for natural calamities, it also insures the risk of fire catching your house and destroying the contents of your house. The rise in incidence of calamities, including fire caused by electric short circuit is common these days and it will be in your interest to protect your house, bungalow or flat against such risks.

Scope of cover

A basic home insurance policy provides protection against damage to the structure of your house due to perils such as fire, earthquake, flooding and even vandalism. The contents of your house can also be covered if you opt for this feature. Besides the dangers mentioned above, the contents will also be covered against burglary. However, the land on which your house stands is not usually included in the cover.

If you are living in a rented house, do consider insuring the contents as they belong to you. Home owners should buy a comprehensive policy that covers both the building and its contents. There are off-the shelf policies available which include a basic value for the contents of the house and then there are policies which details the contents. To arrive at the sum assured, multiply the floor area of the house by its current cost of construction. As for the contents of the house, make an inventory of all the valuable items, put their original cost against them, and arrive at a total figure.

The premiums on such a policy are not very high and for Rs 2,000–Rs 3,000 annual premium a 2-bedroom house in a city with contents worth Rs 40 lakh can be insured. Therefore, if you have been wrongly assuming the cost of home insurance to be high—make sure you get one for your house immediately.

olmdesk@outlookindia.com