Protecting Your Home: A Guide to Home Insurance in india
When purchasing home insurance, Indian policyholders have several options. Beyond traditional policies,a standardized plan mandated by the Insurance Regulatory and Progress Authority of India (IRDAI) was launched in 2021. This comprehensive policy covers both the structure of your building and it’s contents.
The standardized plan automatically includes coverage for contents up to 20% of the sum insured, wiht a maximum limit of Rs. 10 lakh.Policyholders can choose to increase this coverage by providing details of their belongings or opt-out of the contents cover altogether. Moreover, the plan incorporates several built-in add-ons, including coverage for damage caused by terrorism, rent for option accommodation if your home is uninhabitable, fees for architect and consultant engineers (up to 5% of the claim amount), and debris removal costs (up to 2% of the claim amount).
Expanding your Coverage with add-ons
Beyond the standard building and contents protection, you can customize your policy with additional coverage by paying an extra premium. These add-ons can cover a range of needs, such as:
* Alternative Accommodation: Covers expenses if your home becomes uninhabitable.
* Loss of Rent: Designed for landlords, providing rental income during periods when a tenant must live elsewhere due to covered damage.
* Temporary Housing: Helps homeowners or tenants cover the cost of living elsewhere if their home is uninhabitable.
* Valuables: protects items like jewelry, cameras, artwork, antiques, and portable electronics.
* Pet Injury: Covers veterinary expenses for injured pets.
* Utility Expenses: Covers costs associated with utilities.
* Debris Removal: covers the cost of removing debris after a covered loss.
Determining the Right Cover Size
Accurately calculating the necessary insurance amount is crucial. This involves assessing the value of both your house and its contents.
For House Building:
The cover size should not be based on the market value of your home, but rather on the cost to rebuild it. This is determined by multiplying the current reconstruction cost per square foot by the carpet area of your house.
* Example (Pune, 2025):
* Carpet Area: 1,000 sq ft
* Construction Cost: Rs. 4,000 per sq ft
* value of House & Cover Needed: rs. 40,00,000 (1000 x 4,000)
For Contents:
Calculate the estimated replacement value of each item – the current cost to purchase similar equipment and furniture with the same specifications. It’s wise to add a 10% markup to account for potential price increases.
For Valuables:
The sum insured for jewellery, artwork, and other valuables is typically determined on an ”agreed value basis.” This requires an agreement between you and the insurer, supported by a valuation certificate or report.
Policy Tenure
Home insurance policies typically have a minimum tenure of one year, but can extend up to 30 years. Multi-year policies offer cost savings, lock in premiums for a longer period, and eliminate the annual renewal process. If you have an annual policy,it’s essential to review your coverage at each renewal to account for inflation and rising construction costs.
It’s also vital to inform your insurer of any modifications to your home’s structure or new household items purchased during the policy period.
avoiding Common Mistakes
A frequent error is using the market value of your house to determine the cover amount. Insurers generally use a “reinstatement basis” to calculate the cover size, estimating the cost to rebuild your home to its original condition using current market rates for materials and labor.
Experts recommend obtaining quotes from a licensed civil engineer or architect to accurately assess your property. Adding an additional 10% to the estimated cost can help account for potential cost escalation during the policy period.