When one buys a house, the first few things they tend to go for is customizing it according to their requirements. Your dream of having a comfy sofa with a side table so that you can relax watching your favourite shows on a wall-sized TV screen. Now is the time you can make it happen. But there is another critical checkbox you must tick – buying home insurance.
A home insurance policy is one of the most ignored financial covers that you must avail. Although we see a steep rise in homeowners in the last decade, the demand for home covers isn’t matching up. The most common reason is the complexity involved, along with insufficient awareness.
Let us understand a few important home insurance terms that will ease out the process of availing one –
Sum insured is the maximum amount that the insurance company will reimburse in case of any damage to your house. By default, the insurance company considers the valuation for insurance based on per square footage. If you wish to insure any of your appliances and furnishing, the same need to be declared while availing a householder policy. A point to remember that such sum assured does not mean you will be awarded the entire amount in case of any damage. It will be based on the extent of damage only.
Reinstatement value represents the cost of replacing the damaged property at its current market value. It is determined ignoring the depreciation component. A reinstatement value provides reimbursement to the policyholder in case of damage to restore at its original state. In the case of reconstruction, the property must be constructed in the same place or other location but must be of equal value of the property damaged. This value of reimbursement is subject to the ceiling of your sum insured amount.
Actual Cash Value / Market Value
Market value reimburses the policyholder in case of damage to the property and its furnishings and appliances (if insured). It considers the depreciation to determine its appropriate value. Here the policyholder is not reimbursed an equivalent amount to the purchase price of the asset.
Standard Fire & Allied Perils
You can insure your home using a standard fire and allied perils policy. It offers protection to your home against the loss caused due to both natural as well as man-made perils like fire, floods, storms, earthquakes, strikes, riots, explosions and landslides. You can find more details about them in your policy document.
A deductible is an element required to be borne by the policyholder in case of any repairs or reconstruction. It specifies the amount before which the benefits under the home insurance policy kicks in.
Coverage means the various cases under which you shall be reimbursed for the damages or repairs. Thoroughly reading the policy document will help in staying aware about the coverage offered in your home insurance policy.
Premium is the amount you pay to the insurance company to cover the expenses in case of damage. Home insurance quotesare determined based on the various benefits that your insurance policy is bundled along. You can evaluate your quotes of the online home insurance premium calculator.
Once you are familiar with common terms used in a home insurance plan, you can buy a suitable insurance cover. Make sure you are not under-insured and opt for maximum protection by including all your valuable assets; finally, a stitch in time, saves nine.