House Insurance Policies can be of two types:
- Building Policy
- Package Policy
As is evident by the name, the Building Policy covers the structure of the building. The policy will cover the damages caused to the structure only. This type of cover is useful for the homeowners or building owners who are renting out the building to a tenant for the residential or commercial purpose.
Homeowners can buy the building policy for multiple years.
Package Policy covers the contents within the building along with the structure. These contents may include, household goods, furniture, appliances, gadgets, jewelry, etc. can all be covered along with the structure of the building under Package Policy.
Apart from assisting you financially in reestablishing your household/building home insurance can also include the following additional benefits for the homeowners:
- Rent expenses for alternative accommodation up to a limited period or till the house is rebuilt (whichever is earlier)
- Public liability: If any person is injured or his/her property is damaged due to the destruction of your property, any compensation payable to such party.
What Perils Are Covered?
Damage to Property and/or the contents within the property because of the following acts is covered by the policy:
- Fire and Allied Perils
- Burglary and Theft Covers
Some insurers also cover the household goods while they are being moved within the country or worldwide.
A Case of Home Insurance
Abhishek Sarna had bought a residential property in Ahmedabad in the year 1995. The newly constructed property was valued and insured for Rs. 30 Lakh in that year. He also insured his household goods and valuables under the packaged policy for Rs. 8 Lakh.
Purchasing a comprehensive cover Abhishek had insured his new house for earthquakes and burglary as well.
By the year 2000 his home insurance sum assured had increased to Rs. 32 lakhs to keep up with the rising construction costs and content insurance up to Rs. 10 lakhs.
His house building suffered enormous damage in the earthquake of January 2001. Because of the building collapse, much of the household goods were destroyed or damaged. The house had to be rebuild which cost Abhishek approximately Rs. 37 Lakh, out of which Rs. 32 Lakh was reimbursed by the insurer for the reinstatement of the house.
Also, his family had to stay at a hotel for the three and a half months while the house was being rebuilt. Rental expenses for up to 12 weeks were shared by the insurer in this period.
His household goods, however, were insured at depreciated value, and thus only 30% of total reinstatement and repair value of goods was covered by the insurer. However, even that was a significant relief for Abhishek since the major cost was from the destroyed building.
Most household goods which were damaged included electronic goods, ceramic pots and glass items, which Abhishek can easily replace over time.
Abhishek had estimated his total loss more than Rs. 40 Lakhs including the structure, contents and hotel accommodation, fortunately, it ended in less than Rs. 10 Lakh being paid from his own pocket thanks to the Home Insurance Policy.
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