Home Insurance in India

Why Is Home Insurance Important in India?

Due to increasing urbanization and environmental risks, Indian homes are vulnerable to:

• Natural disasters like floods, landslides, earthquakes, and cyclones
• Fire accidents, electrical short-circuits and other accidental damages
• Theft, burglary, and vandalism
• Damage from riots, strike, malicious damages and terrorism

A home insurance policy ensures financial coverage in case of happening of such unforeseen incidents, thus offering peace of mind and stability.

Key Benefits of Buying Home Insurance

Here are the key benefits of buying home insurance in India:

• Protection against natural and man-made calamities
• Covers both structure and contents
• Peace of mind – Especially for people living in disaster-prone areas
• Affordable premiums compared to the value insured
• Add-on benefits like loss of rent, rent for alternate accommodation, etc.
• Customizable policies – You can cover only structure, only contents, or both
• Optional riders or add-ons to cover breakdowns of appliances, loss of valuable items, liability and personal accident, etc.
• Easy online purchase and claim process

Home Insurance Types

• Structure Insurance: Covers rebuilding costs for home structures after fire, natural disasters, or accidents.
• Contents Insurance: Protects household items against fire, calamities, burglary, breakdowns, and accidents.
• Comprehensive Plan: Combines structure and contents coverage against fire and allied perils, plus some additional in-built & paid protections against theft & burglary, loss of jewellery & valuable items, loss of rent, debris removal expenses, architect & engineer’s fees, breakdown of appliances, personal accident, liability, and terrorism covers.
• Tenant Insurance: Covers the personal belongings of tenants. Tenant’s liability cover can also be taken as an add-on to cover financial liability of the tenants if they unintentionally damage the rented property (structure & contents).
• Landlord Insurance: Protects owners’ rental or self-occupied properties against unforeseen events and may also provide coverage to home loans by banks to owners.

Some of the well-known general insurance Cos. which are providing Home Insurance with different names in India are Bajaj Allianz, ICICI Lombard, SBI General, Go Digit, Tata AIG, HDFC Ergo, IFFCO Tokio, New India Assurance and other private & public sector Cos.

Bharat Griha Raksha Policy – A Standardised Home Insurance Product

Apart from different home insurance policies, Bharat Griha Raksha (BGR) Policy is a standardized home insurance product introduced by the Insurance Regulatory and Development Authority of India (IRDAI) for Indian insurers to provide customers a comprehensive coverage for residential properties at affordable premiums.

Key Features of the Bharat Griha Raksha Policy:

1. Comprehensive Coverage:
   • Protects against a wide range of perils, including natural disasters (e.g., earthquakes, floods, storms, landslides, lightning), fire, explosions, bursting of tanks & pipes, leakage from automatic sprinklers, and certain man-made events like riots, strikes, malicious damages, acts of terrorism, impact damage, missile testing operations and theft within 7 days following occurrence of an insured peril.
2. Automatic Coverage for General Home Contents:
   • Automatically includes coverage for general home contents, calculated as 20% of the sum insured for the home building, up to a maximum of ₹10 lakh. Policyholders have the option to opt out if they do not require this feature. Additional premium is payable on insuring home contents more than Rs. 10 lakhs.
3. Coverage for Valuable Contents:
   • Valuable contents can be covered on an ‘agreed value’ basis by declaring list of such items specifically, on the basis of valuation certificate by an authorised agency.
4. No Underinsurance Clause:
   • Ensures that if the sum insured, based on the information provided, is less than the actual value at risk, the difference will not affect the claim amount payable.
5. Sum Insured Escalation:
   • For long-term policies up to 10 years, the sum insured increases automatically by 10% per annum on each policy anniversary, up to a maximum of 100% of the initial sum insured, without additional premium.
6. Additional Free (Built-in) Covers:
   • No additional premium is payable to cover loss of rent or additional cost of rent for a reasonable period (up to 3 years) required for repair of damaged home, reasonable costs for debris removal (up to 2% of the claim amount) and fees for architects, surveyors, and consulting engineers (up to 5% of the claim amount), personal accident cover of Rs. 5 lakhs (in the event of unfortunate accidental death of the insured and/or spouse) on occurrence of an insured peril. Premium is chargeable for coverage beyond above limits.
7. What is Not Covered under BGR Policy:
   • Bharat Griha Raksha Policy is a standardised policy to cover majorly natural calamities and a few common related man-made accidents as above. For any additional/ stand-alone covers like PA, Liability, breakdown of appliances, theft & burglary, etc., these can be taken separately or under any other customized home insurance plans.

Premium Rates:

The BGR policy is designed to be affordable, with premiums varying based on factors such as the sum insured, property location, age of the building and type of construction. The sum insured for structure is based on carpet area × cost of construction per sq.ft. As per available data, for a sum insured of Rs. 50 lakhs on building structure + Rs. 10 lakh on home contents, annual premiums from various insurers can range from Rs. 2000 to Rs.4000 depending on the above said factors and covers opted for. The premium under non-BGR customized policies can be a bit higher depending upon the perils.

What is Covered and What is Not Covered in Home Insurance Policies

What is Covered (Inclusions):

Most of the home insurance policies being offered by different insurers cover –

• Fire
• Explosion/ implosion
• Natural calamities like lightning, flood, earthquake, landslides, etc.
• Bursting of water pipes & tanks
• Impact damage of any kind
• Riots, strikes, malicious damages
• Acts of terrorism
• Theft following a loss due to an insured peril
• Some of the comprehensive plans cover additional free built-in covers like loss of rent, debris removal expenses, architects & engineers’ fee up to specified limits, following a loss
• Other paid add-ons like accidental breakdown of home appliances, loss of valuable items, personal accident, tenant’s liability, stand-alone theft and burglary losses, etc., on payment of additional premium.

What is Not Covered (Exclusions):

It is important to know what is not covered under the Policy. Following are the most common Exclusions under Home Insurance policies:

• Deliberate, wilful or intentional acts or omission
• War, invasion or war-like operations, civil war, mutiny, civil commotion amounting to military rising, rebellion and the like.
• Ionising radiation from any radioactive or nuclear fuel or nuclear waste and such like materials
• Pollution or contamination unless the pollution or contamination itself has resulted from an insured event
• Loss, damage or destruction to any electrical/electronic machine, apparatus, fixture, or fitting by short circuiting, this exclusion applies only to the machine unless such machine is covered under Breakdown Section of the Policy.
• Loss or damage to bullion or unset precious stones, manuscripts, plans, drawings, securities, obligations or documents of any kind, coins or paper money, cheques, vehicles, and explosive substances unless otherwise expressly stated and accepted in the policy.
• Loss of any insured item which is missing or has been mislaid, or its disappearance cannot be linked to any single identifiable event. Theft & burglary can be covered under certain comprehensive plans as an add-on cover on payment of additional premium.
• Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or damage of any kind or description whatsoever.
• Any reduction in market value of any insured property after its repair or reinstatement.
• Any addition, extension, or alteration to any structure of home building that increases its carpet area by more than 10% of the carpet area existing at the time of taking insurance unless declared and additional premium is paid there-on.
• Costs, fees, or expenses for preparing any claim.

For complete understanding of what is covered and what is not covered, insured must read the policy document carefully and can approach insurer to explore possibility of including any additional covers, if required under the policy, like personal accident, liability etc. covers are in general not part of the policy but can be included on payment of additional premium.

Buying Tips for Home Insurance

• Sum insured is the maximum amount the insurer will pay in the event of a claim. It should be based on the replacement value, not the market value, of the insured asset.
• Sum insured for building structure should represent actual cost of reconstruction, and for contents, it should be actual cost of replacement as on the date of taking insurance. Under-insurance may prove costly and will result in to proportionate reduction in claim at the time of loss.
• On the other hand, cost of land or appreciated market value of home is not coverable, hence no point in declaring their value under sum insured as it would be waste of premium.
• Provide detailed list of precious jewellery, costly paintings and other valuable items, which can be covered on ‘agreed value’ with the insurer on the basis of their valuation certificates and purchase bills.
• Choose the right type of cover (structure, contents, or both)
• Opt for add-ons like rent loss, alternative stay, breakdown of appliance cover, burglary, etc. as required. While some of these can be free (built-in) covers, but some are paid add-ons.
• While plain home insurance may be quite cheap, add-ons may be costlier, hence these can be opted for judiciously.
• Disclose property usage, construction & other details as required in the proposal form honestly.
• Save premium with long-term policies (up to 10 years)
• Buy home insurance online for lower premiums and convenience
• Tenants should buy contents-only They can go for tenant’s liability cover only if required or as demanded by the landlord.
• Compare multiple policies online and purchase the one which suits to your requirement.
• Understand the claim procedure and documentation needed

Final Thoughts

Our homes can suddenly face natural calamities like floods, earthquakes, cyclones, and man-made risks such as fire, accidents, riots, and burglaries. As homes including contents are costly assets, home insurance policy acts as a financial shield in the event of such scenarios. Purchasing a home insurance policy in India is a smart and necessary step to protect your home from unexpected loss or damage; with customizable policies, digital purchase options, and affordable premiums, it is easy and convenient.