Home insurance: Ensure policy covers calamities, pays reconstruction cost

Disclose all extensions, additional structures at the time of purchase

The recent floods and landslides in Himachal Pradesh, Maharashtra’s Vidarbha region, and the north-eastern states of Manipur and Mizoram have destroyed thousands of homes. These events highlight the need to purchase home insurance.

 

Low penetration despite high risk 

Home insurance penetration in India remains low. “India ranks fifth globally in terms of natural disasters, yet home insurance penetration remains a mere 1 per cent,” says Shashi Kant Dahuja, executive director & chief underwriting officer, Shriram General Insurance.

 

“Even though disasters happen all around us, people believe it is not going to happen to them and hence don’t buy this cover,” says Ashwini Dubey, head of home insurance, Policybazaar. 

The financial impact of being uninsured can be devastating. “Bearing the entire cost of repairs or rebuilding out of your own pocket can wipe out savings, force people into debt, or even make it impossible to restore their home,” says Dilip Baba, head – commercial & speciality underwriting, Go Digit General Insurance.

 

Cover for natural disasters 

Earlier, policies excluded perils like earthquakes and volcanic eruptions. These are now included under Bharat Griha Raksha, introduced in 2021 following directions from the Insurance Regulatory and Development Authority of India (IRDAI). “This policy covers a total of 14 perils, including floods, landslides, earthquakes and even volcanic eruptions. No riders are required to cover them,” says Dahuja. 

 

Estimating the sum insured 

The sum insured should reflect the cost of reconstructing the property. “To determine the right sum insured for a building, the insured should multiply the structure’s carpet area with the cost of construction at the policy commencement date,” says Dahuja.

 

Baba recommends getting an assessment from a licensed civil engineer or architect. For contents, he suggests using the current cost of replacing equipment or furniture of similar specifications. “To be on the safer side, declare a 10 per cent markup to take care of escalations during the policy period,” he says.

 

Choosing the right insurer 

Understand policy inclusions and exclusions to avoid surprises during claims. “This will help avoid any unexpected hurdles at the time of claim,” says Anurag Kumar, head of institutional relations & corporate business, InsuranceDekho.

 

Compare multiple insurers. “The comparison should be based not just on premium but also on claim experience, service quality, and policy flexibility. Ask about the availability of add-ons like coverage for natural disasters, theft, or high-value items, which are left out of some plans,” adds Kumar.

 

Go with an insurer whose customer support is reputed to be responsive. 

 

Understand exclusions 

Common exclusions include wear and tear, construction defects, pre-existing damage, unauthorised extensions, and non-concrete structures.

 

“Damage due to illegal activities or the presence of illegal items in the home gets excluded. Extensions exceeding 10 per cent of the original insured area are also not covered,” says Dubey.

 

Damage from war, terrorism, or nuclear events is not covered, nor is damage caused by negligence.

 

Transparent disclosure is key 

Transparency at the time of purchase is crucial. “All extensions or additional structures, like boundary walls, must be declared separately for them to be covered. Even if item-wise declaration of household contents is not required, homeowners should provide a lump-sum estimate,” says Dubey.

 

Kumar advises buyers to confirm whether the policy is based on reinstatement or market value, as not all policies cover the full cost of rebuilding or replacement.

 

Do not assume that all risks are covered. In policies of some insurers (not the standard cover), natural calamities may require purchase of a rider.

 

Steps for filing a claim

 

-  Report the incident to the insurer at the earliest, describing the cause of damage

 

-  If the damage involves criminal activity, file an FIR

 

-  Take photographs and videos of the damaged areas and items

 

-  Prepare an inventory of the damaged contents

 

-  Submit documents including the filled claim form, photo and video evidence, inventory list, repair estimates, FIR or fire report (if applicable), proof of ownership, and KYC documents

 

-  Review the insurer’s settlement offer; negotiate if needed