Why Should Home Insurance be Mandatory in India? – Top 4 Things to Watch Out For!

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Home Insurance

We Indians avoid doing certain things unless the government doesn’t impose a penalty. Whether it is about abiding by traffic rules or simply buying the motor insurance, we go for them because we are afraid of penalty charges.

No wonder, several experts strongly believe that home insurance should be made mandatory in India, especially for those who are staying in calamity prone areas. As per the survey conducted by ICICI Lombard, about 93% Indians do not have home insurance despite knowing its importance. The repercussions of natural disasters are always more than what one can anticipate. While one protects himself/herself and family with life and health insurance, people usually overlook the need for home insurance.

The Insurance Board of Nepal is working to make it mandatory for people to insure their houses. The government took this step after its appeal to Nepalese to purchase home insurance was ignored, despite around 1,60,786 houses destroyed and 1,43,642 damaged during the massive earthquake in Nepal during 2015.

Your house protects you and your family from multiple types of risks and damages. This makes it fair that you should protect your ‘abode’ from all the risks that it is exposed to. For most of us, a home is an investment of a lifetime, and so is even more important to safeguard your biggest investment against all types of risks and damages.

Your home can be damaged by a number of unpredictable factors. There are various risks that your home is exposed to. It can catch fire due to a faulty electronic appliance or an accident in the kitchen. Burglars might find their way to your house in your absence. It can become the victim of the Mother Nature and get damaged due to any natural calamity like earthquake, lightning, storm, etc. Any damage to your house can drain you financially as well as emotionally. If, God forbid, there is a major loss to your property; you might find it daunting to restore everything with the high amount of money involved.

However, the irony is that we don’t think before spending lakhs on constructing and decorating our houses, but when it comes to insuring it, we consider it as a waste of money. As per the report of the global reinsurer Swiss Re, during the floods that wrecked Chennai in 2015, the city reported a financial loss of more than Rs 14,709 crore. Of this, only 34% were insured, amounting to a huge loss of Rs 5,049 crore.

There have been many instances where houses of people have faced the brunt of nature and were badly damaged. Thefts are common and what can safeguard you from a potential financial liability in the event of loss or damage is a home insurance policy. Any damage to your home can have a severe financial as well as emotional setback, which a comprehensive home insurance policy can protect you from.

Like a health insurance policy that safeguards your finances against soaring medical costs, home insurance shields your house and its content against different kinds of risks, including natural and man-made. It also covers the loss in case the valuable content of your house gets damaged or stolen.

Home Insurance - Annual LossSource: The Times of India

A quick look at the benefits of a home insurance policy:

  • Coverage from natural calamities: As you can’t predict the exact timing of a natural calamity, take home insurance to protect it from all natural disasters, which can strike anytime and anywhere without any warning.
  • Man-made risks have recorded an upsurge: It is quite evident from some recent reports that risks, like theft, burglary, housebreaking, etc. are on the rise. Many times, even high-end safety equipments fail to secure the house. Further, strikes, terrorism, and riots pose a serious threat to your house. As not every property insurance policy offers coverage against these risks, you can buy the coverage in the form of a rider.
  • Cover is available even if you don’t own a house: Irrespective of whether you are the owner or a tenant, you can buy home insurance to cover your house and its content. In case you are a tenant, you should buy the policy that covers the content of your house.
  • You have costly items in your house: Most of us leave no stone unturned in furnishing our houses and beautifying it with items like costly domestic appliances, furniture, and fixtures. You might also have items that hold sentimental value like jewellery, artwork, etc. But what would happen if someone steals them? Besides the emotional loss, there will be a financial loss also. A home insurance policy makes sure that your precious items are well protected from all hazards.
  • Assistance is available in case of relocation: In case your house is being reconstructed, you may require finding an alternate accommodation to live, which means, spending money on rental accommodation. There are some insurance companies which bear additional expenses in the form of rent for the alternative accommodation. It makes sure that you have a comfortable place to live while your home is being reconstructed.

Choose what to insure

Do you only want to insure the land and structure or content of the house also? Nowadays, you can easily customize your home insurance policy as per your individual requirements. If you live in a crime prone area, insuring the content (especially jewellery) of the house with the theft insurance policy is paramount. In any case, a comprehensive home insurance wins hands down in terms of popularity as it covers every setback, ranging from fire, earthquake to lightning and burglary.

Home Insurance - GraphSource: Livemint.com

Stay away from the under insurance

When people think that a particular expense is not important, they deploy ways to cut down on it by hook or crook. They tend to undervalue their property knowingly just to save on premium. Though it serves the purpose in the short-term, it defeats the purpose of buying a home insurance in the long run.

If something unfortunate happens in the future and you require money for restoring your house, you’ll merely get peanuts because you made the mistake of under insuring your property. For instance, if the structure and content of your house are under insured by 30%, the claim amount received will also be 30% less than the actual claim amount.

For people who are thinking of under insurance, I would strongly suggest that they should not go for a home insurance at all. Either way, a major chunk of the loss will be borne by them. Never buy home insurance just for the heck of it. I’d again strongly want to emphasize that correct valuation of property and its content is necessary to optimize the advantages of home insurance.

Think long-term

Surely, you will be living in your home for not one or two years but for a long duration. So, it makes complete sense if you purchase a long-term home insurance policy, say a 10 or 20year plan in one go. It will not only save you from the hassles of renewing the insurance policy every year, but will also cut premium rates. Some insurers give savings up to 50% for a 10 year policy. Not bad, right?

Know the claim process

It is necessary to cover your home without ignoring the claim process. At the time of a claim, the insurer will thoroughly inspect all your goods, and therefore, it is inevitable to make the right declaration and ensure that you have sufficient evidences. An insurer can refuse to settle the claim in case of subsidence, poorly maintained building, or illegal construction.

Conclusion

A home is one of your valued possessions and insuring it is the right way to secure it for the many years to come. No one knows what the future has in its store for us, but we can at least take steps to ensure that we have all the effective tools to overcome serious setbacks. While we all hope that the government makes home insurance mandatory and gives tax benefits to policyholders, it is pertinent to buy it without any persuasion.

As it is said, the best journey takes you home. Go for a comprehensive home insurance policy and curtail the uncertainties of the future. This way you can make sure that your home sweet home is secured.

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