Buying a home is expensive. Homebuyers often avail of bank loans and end up spending most of their savings on repaying the amount. So, where will you get the extra funds to repair or rebuild your house? Home insurance policy offers certain coverages that benefit homeowners in case of losses.
Some of the common threats to a house include fire, earthquakes, floods, and cyclones. Home insurance coverage includes compensation for damage due to any of these natural calamities. Therefore, this policy plays a crucial role for home buyers. A home insurance policy has different components of coverage.
Here are the five components that you should ensure are present in your home insurance policy –
1. Structure and content cover
The policy covers damages to the structure in case of a fire, flood, earthquake, storm, or cyclone.
Content cover, on the other hand, means coverage for articles inside the home like appliances, furniture, and fittings, or personal belongings like jewelry.
Home insurance policies offer coverage for either the structure or contents of the home or both in the case of a package policy.
Insurers recommend the package policy as it provides all-inclusive coverage.
2. Fire and associated perils
Every home insurance policy provides coverage against damage due to fire and related incidents. These include natural calamities like volcanic eruptions, lightning, bush or forest fire, storms, and floods.
The policy also covers damages due to an implosion or explosion, destruction caused by an aircraft, riots, strikes, or civil unrest.
Moreover, the insured is covered in an instance of impact damage, landslide, or rockslide. The same is for overflow or bursting of water tanks, leaking of automatic sprinklers, and missile testing operations. In addition to fire, the basic fire cover includes two sets of risks. In insurance parlance these are known as RSMD and STFI which stand for Riots, Strikes, Malicious Damage; and Storm Tempest Flooding and Inundation respectively.
3. Burglary cover
Under this cover, the policy provides for the loss of contents of a house in an event of burglary or theft. The burglary cover is often inbuilt into the coverage for the contents of the home. However, one needs to check the scope of coverage to ensure that the burglary cover is available under the plan. Some insurers will exclude theft which means that there has been no forcible entry into the premises.
4. Public Liability cover
A home insurance policy covers the house owner’s liabilities in case an individual suffers injuries, damages, or loss of property inside the premises of the insured home or due to the structure.
For instance, the insured may have to pay damages to an individual who has suffered a fracture after a fall inside the insured home. The home insurance policy will pay for the medical costs incurred for treating the fracture.
Similarly, if a portion of the insured home falls on a third party’s property the policy will cover compensation to be paid for the repairs.
5. Terrorism cover
The policy covers any damage to the house and/or its contents due to terrorist activities. The terrorism cover might be inbuilt into the policy or can be taken as an extension by paying an additional premium.
6. Coverage extensions
Home insurance policies also offer coverage extensions to enhance the scope of coverage. Some common extensions available include renting for alternate accommodation when the damaged home is undergoing repairs or loss of rent for the period the home is undergoing repairs after a claim.
The other extensions include coverage for loss of cash from home, a personal accident, loss of portable electronic equipment, or a pedal cycle.
The policy will also pay for key and lock replacement costs, ATM withdrawal theft, and employees’ compensations if these extensions are taken.
The premium for the home insurance policy depends on the chosen coverage aspects. The extensions attract a nominal additional premium.
So, before buying a home insurance plan, do make sure that it offers the most comprehensive coverage.