How To Decide How Much Home Insurance Cover You Need?

The last decade has witnessed quite a few natural disasters causing harm to not just human life, but also property. With an increase in these unpredictable natural disasters, the monetary value of such events is said to exceed billions of dollars. As reported by PolicyBazaar, a World Bank estimate suggests nearly one-third of India’s districts are hazard prone. Further, the National Disaster Management Authority of India reports that 60% of the land in India is prone to earthquakes and 8% to cyclones. Despite such high risk figures, home insurance is still an undervalued general insurance product.

But if you are covered by a home insurance plan, you can safeguard yourself against financial losses due to natural calamities as well as accidents that result in damage to your home.

A home insurance policy generally covers two basic features—coverage for structure and coverage for contents. As the name suggests, structure cover compensates for the repairs that are required for the construction of your home. On the other hand, the content cover compensates for the cost of the contents that are damaged. These contents include appliances, jewelry, and even artefacts that are declared at the time of purchase.

Now that you know what is covered by a home insurance plan, how do you decide on the quantum of insurance cover? This article aims to tackle this burning question helping you opt for sufficient insurance cover.

  • Cost of rebuilding the house

The first thing to keep in mind when deciding upon the quantum of home insurance coverage is the cost of reconstruction. It can be arrived at by determining at what amount you would sell your home. There are several other factors that are at play in this process, some of which are: the built-up area of the house, construction cost, cost of materials used, style of home, number of rooms, etc. *

  • Cost of personal assets

Most home insurance plans include personal asset coverage in their policy scope. However, there is a cap on the amount of coverage that is available. This is generally in the range of 50% to 70%. Thus, when determining the sum assured, you need to list down the different assets that need to be included as a part of your home insurance policy. This way you can avail sufficient insurance cover for not just the structure of your home, but also the contents within it. Further, there are policies that compensate either the actual cash value of these damaged goods or provide a replacement cost. Depending on the type of policy, the home insurance quotes differ. *

  • Cost of alternate accommodation

Another handy feature in a home insurance cover is the facility for alternate accommodation. Such an alternate accommodation cover provides compensation till your damaged home is repaired, thereby eliminating financial worry for the cost of staying at a different location meanwhile. When shortlisting a home insurance plan, it is essential to keep this coverage in mind as it will help avoid any financial hiccups in case of an unfortunate accident. *

  • Liability coverage

A home insurance plan not only covers the damages to your own house, but also the liability that may become payable to a third person for damages. A fire at your home damaging the property of your neighbor is an example where liability coverage comes in handy. Hence, it must also form a part of your policy scope and be considered when determining the scope of your policy. *

* Standard T&C Apply 

With these different features of a home insurance plan, you can decide on how much coverage your policy must provide for and accordingly buy one. Moreover, at the time of purchasing the plan you can compute the premium with the help of a nifty tool called the home insurance calculator and choose the plan that suits your budget. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.