Recent seismic activity in Delhi and Kolkata has highlighted the critical need for home insurance, a vital shield against unforeseen natural disasters and the financial burdens they bring. Cities like Mumbai, Bengaluru, and Chennai have also grappled with severe flooding in recent years, leading to considerable property damage. While natural catastrophes are inherently unpredictable, home insurance offers a valuable financial safeguard against such losses.
“Home insurance is a broad policy that protects against fire and related risks including floods and earthquakes, covering both the structure of the home and its contents,” explains Amrish Dubey, SVP, Personal Lines, TATA AIG General Insurance.
Covering Construction-Related Damages
Home insurance is also designed to provide protection against man-made damages. In Bengaluru, for example, many residents have reported that construction work for the metro rail has caused cracks in the walls of nearby buildings. Home insurance can cover damages in these situations as well.
“If a customer’s property is legally compliant and all documents are in order, damage to the home’s structure resulting from adjacent metro construction will be covered under a comprehensive home insurance policy. It is important that the policy explicitly includes coverage for construction-related risks,” says Ashwini Dubey, Business Head, Home Insurance at policybazaar.com.
For a claim to be considered valid, the insurance policy must be active before any damage occurs, as most policies do not cover damage retroactively. “Therefore, the homeowner must have an active policy before construction commences, with no existing damage at the time coverage was purchased,” he adds.
Settling Home Insurance Claims
The claim settlement depends on the product type selected. Some insurance products offer claim settlements on a reinstatement basis. In these instances, the insurer will reimburse the policyholder for the actual cost of repairs or rebuilding, rather than simply paying out the total sum insured. Claims can also be settled on an agreed value basis, up to a specified sum assured.
Dubey from Tata AIG states, “The reinstatement option is available for both flats and individual houses, whereas the agreed value option is available only for flats. It’s important to note that the agreed value claim settlement is determined by the sum insured, while the reinstatement option covers the cost of rebuilding the building structure.”
Individual vs. Housing Society Coverage
When living in an apartment within a housing society, several factors are important to remember.
“According to RWA (Resident Welfare Association) law, RWAs are legally required to have structural insurance for the building and common assets within the housing society. This legal requirement ensures that the entire building and its shared amenities are protected,” says Vivek Chaturvedi, CMO and Head of Direct Sales, Go Digit General Insurance.
This collective insurance approach provides broad coverage for common areas and structural elements, whereas individual policies primarily cover personal units and their contents. When an apartment is insured separately, the building structure claims will be based on the carpet area declared at the time of purchase. If the building is rebuilt, the insurer will cover the apartment’s share of the structure.
“If the building is not rebuilt, the insurer will provide a claim based on the reinstatement value, covering the declared sum insured, carpet area, or cost of construction for the individual unit,” says Dubey from policybazaar.com.
Home Insurance and Contents Coverage
To insure the contents of your home, you will need a separate ‘contents cover’ insurance policy. Contents cover protects items such as furniture, appliances, electronics, and clothing against damage or theft caused by covered perils. Standard policies frequently include coverage for valuables such as jewelry and artwork, up to specified limits. However, for higher-value items, it is typically recommended to opt for a ‘Cover for Valuable Contents on Agreed Value Basis.’
“This allows you to declare and insure these items at an agreed-upon value, providing more comprehensive protection. Therefore, while basic contents are covered, valuables require separate declaration or a specialized add-on for appropriate protection,” says Chaturvedi.
Filing a Home Insurance Claim
In the event of a claim, the insured must notify the insurance company as soon as possible, submitting a completed claim form along with all necessary supporting documentation. The policy wordings contain the specifics of the required documents. The insurance company can also be contacted if additional assistance is required.
