When 42-year old IT professional, Debjani bought a new house, the company responsible for her car insurance offered her a significant discount for home insurance. Knowing them to be verified and reliable, Debjani went for it. Only later did she realise that she should have done her research better when she found out that she could have gotten a much better home insurance coverage elsewhere despite the discount.
In India, too many people opt out of home insurance as it is not mandatory. But in the event of disaster or damage due to either natural or man-made causes, many people often find themselves in a precarious financial situation without the security net of a home insurance to fall back on. If you’re considering a home insurance plan, make sure you have all the information you need to take the right decision. Here, we cover the different aspects you need to keep in mind.
Do your Due Diligence and Read the Fine Print
Home insurance must not be looked at as an expense but as an investment. If you’re simply looking for the lowest monthly premium, you might just be compromising your coverage.
Don’t just go for the cheapest or most accessible home insurance plan you can find. Explore a number of options from different insurance firms, and compare different policies. Don’t just compare annual premiums. There are a number of factors you need to keep in mind to estimate the real value of the plan – such as the deductibles, coverage, limits, and exclusions. Many insurance companies do not insure loss of cash or depreciation damage, for instance. Like the fine print says, do go carefully through all policy documents before taking a call.
Find the Right Insurer
Once you have a shortlist of policies and insurance companies, do your research on the companies as well. You’re looking for a good reputation and reliability. Speak to people in your network who may have used the same insurer, and find out about third-party ratings for insurance companies in your region.
Good insurers should also be known for fairly quick processing of insurance claims, else you might find yourself in a bind at the critical time when you most need your insurance money. So check their claim settlement records, and pick carefully. You want to work with the right kind of company, which will work with you to help minimise the risks of loss while drawing up your insurance plan, provide you great customer service as well as a quick pay-out in a time of need.
Take Some Time to Improve Your Credit Score
A better credit score can help you land a better premium — those with lower credit scores often pay a lot more for home insurance. There are many ways to optimise your insurance amount if you take the right steps for your individual situation. Firstly, clear any financial dues — personal loans, automobile loans or credit card dues, for instance. Pay all your bills on time and stay away from any loans till your home insurance comes through.
Make sure to get your no-dues certificate after, and wait for it to reflect in your credit score report before you finalise an insurance policy. Go through your credit report carefully and check for any discrepancies or errors — yes, that can sometimes happen and could affect your credit score too.
Know What Home Insurance Coverage You’re Looking for
If you live in an earthquake-prone zone, don’t just assume that a home insurance policy will cover natural disasters and exigencies. Most policies offer protection against fire and special perils such as lightning or riots, but may or may not cover earthquakes, floods and the like. Similarly, protection against theft or larceny are also usually added on. As a homeowner, are you looking to cover only the structure, or also the contents of your home? If you are a landlord, find out if your insurer covers losses due to tenant negligence.
Find the right combination of policies that work for your living and home ownership situation. And remember, if you take out a policy for the long run, you have a better chance of minimising your premium.
Know Your Home Inside Out Too
The more accurate and specific you are while providing details about your home, the less likely that you’ll get an inflated or undervalued policy. When filling out application forms, make sure that the dimensions, maps and other spatial information is as accurate as possible. This can help you get a more appropriate plan for your house. Take into account your location as well — if you live in a flood-prone area, check for coverage in case of such events.
Ask the Right Questions
Find out what will happen in different scenarios — what happens if you sell your house? If you’ve bought a house with a partner or relative, what will be the consequence of a separation? If you live on the sixth floor, will you be eligible for the cost of reconstruction alone, or will it be based on the price of land (it’s likely to be the former)? What’s the process if the need for claiming insurance comes about — will it be rapid enough in case of emergencies?
As you can see from the guidelines above, there’s a lot you need to find out to be able to make an informed decision. You will have to be patient if you want to find the best insurance policy out there for you. Speak to your financial advisers and make sure you have the information you need to take the right steps. After all, you don’t want to be stuck in a difficult situation only to find out that you’re underinsured.
Home is where the heart is. And that’s why it’s important that you protect your home just as you would protect your heart. So don’t shy away from asking too many questions.
Lastly, be very sure to understand what you’re getting into. Cover all your bases, and that will help you get the right kind of cover for your house as well.