Skip to main content

Insuring your home

Was reading through the economic times , the ET wealth section and didnt find anything great. But came across this nice article on home insurance. Though I have taken a home insurance, I hardly took into account any of the points mentioned in this article. Its a good article and I suggest you to read it.

The link of the same is as follows
http://economictimes.indiatimes.com/personal-finance/insurance/analysis/why-you-should-take-a-cover-for-your-home/articleshow/7472214.cms

You work hard and save money to buy a house and household appliances. You take utmost care to secure your dream house, yet there is the risk of a natural or man-made catastrophe. If you cannot prevent it, transfer the risk. Consider buying a householders- or home . insurance policy. 

Scope of cover 

A package householders policy provides cover to the structure of the building as well as the contents of the house, that belong to the proposer and his family permanently residing with him or her. In case you are living in a rented house or in an apartment where the building is insured by your society, you can buy a customised plan which covers only your household articles and not the building. Some common risks covered under the policy are fire, earthquake, flood, burglary, bursting and overflowing of water tanks, breakdown of domestic appliances and loss or damage of jewellery and valuables by accident or misfortune. Sum insured for certain items under contents, such as works of art, jewellery or other valuables, may be subject to a limit. A householder policy also provides cover against the insured’s legal liability for bodily injury or damage to property of third party. Some policies also cover rent for alternative accommodation during reconstruction of a building that has been damaged by fire or other disasters. Risks covered in the policy and premium may vary slightly from one insurer to another. 

Guide to choose the sum insured 

The purpose of insuring the building is that, in case the building is damaged due to any disaster like fire, earthquake or flood you should get financial support to reinstate it. So the sum insured for the building should neither be the cost of acquisition nor the current market value of the house but the current construction cost because market value of the building includes cost of land on which the house is built. Don’t include the cost of land in the sum insured but don’t forget to add costs for removal of debris. On the other hand, for the insurance of household items sum insured should be the market value of these items i.e. the value for which these used items could be bought or sold in the market. 

If you want to insure the breakdown of domestic appliances, then the sum insured should represent the current replacement value of a similar item. For instance, if you want to insure your two-year-old, 42-inch Sony LCD TV, the sum insured should be equivalent to the current cost price of a new 42-inch Sony LCD TV. However, the claim amount payable would be the amount required to bring the damaged item to the same condition as it was prior to the damage subject to the adequacy of the sum insured. 

Points to remember 

Unlike a life insurance policy, householder insurance policies are contracts of indemnity, which means it is a cover that only restores the insured to his original financial position but the insured cannot gain from the policy. It is very important that the sum insured is adequate because if you are under-insured, claim payments will be reduced by applying the average clause where your claim will be reduced in proportion to the level of under-insurance. For instance, if your property is worth `1 crore but it is insured for `75 lakh and the loss is `50 lakh, claim will be settled to the extent of 75% of `50 lakh i.e. `37.5 lakh and you will have to bear the balance. You must ensure that your house is adequately insured at all times taking into account the renovation, enhancement made to your house or some addition to your household items. Do not just send the renewal cheque when it is due; take the time to review your cover. Read your policy carefully. Some risks are not covered in certain conditions like if the house is left unoccupied for more than a specified period of time. It does not make sense to leave any scope to lose what you have invested in your home. After all, homes are not built every day. 

Comments

Popular Posts

Tax Planning for New Financial year

April, this is the time, when we need to declare the Tax Declarations which we would be doing in the coming year. Some of us declare few investments and only hope to do them sometime in the year. But not all are able to meet that commitment. Here are a few advices, which I would suggest to use as a guiding tool, rather than for planning.


Lets look at the Simple Tax Investments which we can use.
80ccc Upto 2 Lakhs under Section 80 ccc.  In this 2 Lakhs, 50,000/- is only meant to be invested in NPS(National Pension Scheme). The Remaining 150,000/- can be invested in Insurance Plans, Mutual Funds , NSC.From this 150,000, since you would also have been paying PF from the company itself, it would be also considered as an investment. You will need to do it and you dont have a choice. If you have a home loan, the Principal from the home loan, will also be considered as a contribution towards the 1.5 Lakhs. After subtracting the PF amount which you are paying and the House Loan Principal compo…

Clear your debts by part payments

Every one of us, most likely has one or the other type of loan. Those who dont, I must say that, they are indeed blessed
Loan is not a bad thing to have. It gives one the ability to buy something(preferably an asset), at a earlier time, and slowly pay over a period of time.
Though it's a good thing, but at the same time, you need to understand that, it's from  the interest which you pay, which gives banks all the profits and also manage to pay the salaries of all their employees. Not a small amount eh ? So the earlier you reduce you loan amount, the better for you, from your savings point of view.


Let me give you an example, which will tell you, how much you can save by doing a early part payment.
Assume you have taken a housing loan of 20 lakhs and your monthly EMI is roughly 20,000/-. An EMI will have a principal component as well as an interest component. In the initial years your principal component will be very less, while your interest part very high, and this will cha…

Your PF

Every time that you change your company, the HR will give you the document to withdraw the money or transfer it to the next company that you join. And we being we, the urge is to withdraw it, considering the fact that you are so pressed for clearing that long pending credit card bill, which has already absorbed huge amount in the form of 33% interest. Definitely, it makes more sense to clear off the high interest rates debts with these amounts which barely give 9% interest.
But hold on. Though the urge is there to withdraw and I know, almost everyone has immediate needs. But just make sure to keep the money handy for your retired life. Remember, now, you have a source of income and the PF money is meant to take care of you when you dont earn. Please remember that you dont earn a pension like our parents did, when worked for an government organisation. Yes, those are the perks that they enjoy , and we will not be.

So , in short, once you join your new company, please transfer the mone…