How Much Home Insurance Coverage Do You Need?

Home insurance is a policy that covers the cost of repairing your home in case of any damage due to unforeseen circumstances such as fire or natural calamities. The tenure of the policy varies depending on the amount of your policy.

However, it ranges from 1 to 10 years in the case of the structure of the building and home contents or only the structure. Insurance for only the home contents is offered for 1 to 5 years.

This article explores various vital aspects related to home insurance and its benefits. Scroll down to learn more!

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What is the Need for Home Insurance Coverage?

As per recent studies, the Indian districts are prone to several hazards that risk the lives of hundreds and thousands of people. Approximately 58% of Indian land is prone to earthquakes, and 10% is prone to cyclones.

Hence, home insurance policies are significant but remain an under-selling product due to a lack of awareness among people.

However, the buyer might get confused owing to the plethora of options available in the market today. As a result, the Insurance Regulatory Development Authority of India (IRDA) has made the “Bharat Griha Raksha Policy” mandatory for everyone, starting from April 1, 2021.

Also read: Common Signs Your Home Has An Electrical Fault

What Comes Under Home Insurance Coverage?

The Home Insurance Policy mainly covers the loss or any kind of damage caused to the house or its contents. Apart from this, some insurers provide additional coverage in case of natural calamities, terrorism or fire. The essential features of the policy are mentioned below:

- In the case of rented houses, you can get insured for the contents of your home, such as jewellery, clothes, electronics, etc. However, people who own houses can go for the package policy that covers the house as well as its contents. Therefore, a home insurance policy is necessary to secure your house’s future.

The second feature states that buying a home insurance policy that covers only the infrastructure will be responsible for the reconstruction of the building in case of any damage. Coverage for personal assets will only be in case of theft or burglary.

How Much Home Insurance Is Needed?

A homeowner must understand the benefits and significance of a home insurance coverage policy that protects your house, building, family, and belongings. The home insurance coverage estimations require various steps and involve certain factors that have been discussed below:

Expense of Alternate Accomodation

This part of the insurance covers any additional cost of accommodation incurred in case your house gets damaged due to a storm, fire or tsunami. Apart from this, it is also applicable if you have rented out any part of your house. The insurance policy will take care of the rent that you have lost due to damage, which your tenant would have paid in normal conditions.

Expense of Rebuilding House

The house’s rebuilding cost almost equals your home’s selling price. The crucial factors that play an essential role in rebuilding your house are:

Materials used
Local cost of the materials
Number of rooms
Custom built rooms
Any alteration changing the overall value of the house
Special features such as arched windows or fireplaces
Structural style

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Expense of Personal Possessions and Assets

Expenses of personal possessions and assets are some of the essential factors under a home insurance coverage policy that covers any additional cost if your own residence is damaged or destroyed.

Deductible Amount

The deductible amount should also be considered when estimating the cost of insurance you are opting for. If the deductible amount increases, the insurance premium will decrease. Hence, the deductible amount is also to be calculated thoroughly.

How to Calculate Home Insurance Coverage?

If you are a homeowner, then you need to buy home insurance coverage that ensures the safety of your home and its contents. The best variant in this is to opt for “agreed value”. However, independent house owners can also turn towards the variant that offers to pay for the construction.

Now, after this, you need to calculate the coverage amount, which entirely depends on the construction, area, structure and of your house along with its belongings. The following formula is generally used to assess your property structure and belongings:

“Built-up area X Cost of construction per sq. foot = Sum to be insured for”

However, you only need to do a little calculation as the home insurance calculator helps you to compute the amount for home insurance premiums for your home contents and the corresponding building structure.

The home insurance premium calculator requires the following details to calculate your home insurance premium:

Value of Building in INR
Value of Household Items in INR
Carpet Area in Sq. Ft.
Policy Term
City

So, opting for a home insurance coverage policy is essential whether you live on your own property or a rented house. This policy protects your house from certain natural or man-made calamities.

Therefore, investing in the correct type of policy requires intensive research and evaluation that will eventually help you with the deal as per your convenience and financial background.