Home Insurance: What it covers, how much it costs — All you need to know | Mint

With extreme weather events such as heavy rainfall that causes flooding becoming frequent now, home insurance is a safety net that you can rely on for recovering losses from such unforeseen situations. India recorded 5.4 million internal displacements, the highest in over a decade, driven primarily by various natural disasters, in 2024. The country sees huge losses to property due to cyclones and landslides brought by torrential rains among others. Disasters such as flash floods have become more common in major cities.

A good home insurance covers a whole host of incidents including flood, cyclone, tsunami and earthquakes. Here is a guide on what home insurance covers, exclusions and things that you should keep in mind while opting for such policies.

What does it cover?

Home insurance covers physical loss or damage, or destruction caused to the insured property by storm, cyclone, typhoon, tempest, hurricane, tornado, tsunami, flood, lightning, earthquake, forest fire, riot, strike, malicious damages, acts of terrorism, missile testing operations, bursting or overflowing of water tanks, apparatus and pipes among others. It comes with a home building cover that covers any loss, damage or destruction caused to the property and home contents cover that pays for loss and damage to articles.

Subsidence of the land on which your home building stands, landslide, rockslide and impact damage of any kind, i.e. damage caused by impact of, or collision caused by, any external physical object (e.g. vehicle, falling trees, aircraft, wall etc.) is covered. Any theft within 7 days from the occurrence of and caused by any of the above insured events is also covered.

What is not covered?

A home insurance does not cover losses and damages arising out of war, invasion, act of foreign enemy, ionising radiation or contamination by radioactivity, pollution or contamination, short circuiting, arcing, self- heating or leakage of electricity ‘from whatever cause (lightning included)’, loss of earning, loss by delay and consequential loss, reduction in market value of the property, costs, fees and expenses for preparing any claim.

What are the features of home insurance and how much does it cost?

Most home insurance policies are available for a tenure of 1-20 years. They provide coverage for building (structure) and/or contents. Home contents are typically covered up to 20% of the sum insured for the building in standard policies but can be higher and is subject to a cap in rupee terms that varies with each insurer. Flats, individual apartments, row houses and bungalows are covered under home insurance.

Home owners having property that are less than 50 years old can take insurance. Tenants living in rented accommodation can insure the contents of the property occupied by them. A comprehensive home insurance costs ₹3000- ₹5000 per year with the coverage working out to around ₹20 lakh for such premium. HDFC ERGO’s insurance covers buildings worth up to ₹10 crore and home belongings worth up to ₹25 lakh.

“The insurance coverage (sum insured) is typically determined based on the cost of construction and the carpet area of the property. Also, the cost of home insurance depends on the tenure, which ranges from one year up to 20 years,” said Udayan Joshi, Chief Operating Officer, SBI General Insurance.

“A good home insurance policy must first have an adequate sum insured to fully reinstate your home after damage. This ensures that in the event of a total loss, you have sufficient funds to rebuild your home to its original condition,” said Dilip Baba, Head – Commercial & Speciality Underwriting, Go Digit General Insurance.

“It should offer 360-degree protection, covering both the structure and contents of your home. This comprehensive coverage means that not only is the physical building protected, but also your personal belongings like furniture, electronics, appliances, valuables, among others within it,” he said.

Insurers also provide optional covers for valuable contents such as jewellery, silverware, paintings, works of art, antique items and curios at the house on an agreed value basis and for personal accidents arising out of fire and other perils. They also cover removal of debris and loss of rent/ rent for alternative accommodation (capped at a fixed percentage of the claim amount).

Home insurance offers auto-escalation of sum insured by 10% for annual policies and long-term policies. Apart from this, they give optional cover for emergency purchases, hotel stays, damages caused by short circuit, electronic equipment that is damaged or lost and actual expenses incurred by the insured for packing, unpacking, transportation of the insured possessions/ dwelling content to the alternative accommodation. You have to pay an additional premium for these optional covers.

Does it provide cover for the market value of the building?

The value of the building is assessed based on the area of the home and the cost of construction. For instance, if your home is 1000 sq. ft. and the construction cost is ₹4000 per sq. ft., the building will be valued at ₹40 lakh. The sum insured can be a maximum of ₹40 lakh for the building if the construction and the year in which the policy is being taken is the same.

“The insured amount for a home is usually calculated by multiplying the cost of construction per square foot with the carpet area of the property. It’s recommended not to insure for less than this value,” Joshi said. “Remember, cost of land is generally not considered for determining the value for insurance,” he said.

“Insurers typically determine the value of a home for insurance purposes on a reinstatement basis which means the cost to rebuild the home to its original condition at the current market rates at that particular location,” Baba said.

“You should get insurance for the entire reinstatement value of your home. If your building is valued at ₹1.2 crore for rebuilding, you should aim for a policy that covers that full amount to avoid being underinsured and avoid out of pocket expenses,” he said. For older buildings, standard depreciation rates will be applied before arriving at the value for calculating the premium.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.