Rajiv and Ankita are not insurance brokers, but they can still convince you to buy a home insurance policy. Three months after this Delhi-based couple moved into its new flat, a fire caused by an electric short-circuit destroyed furniture and appliances worth Rs 50 lakhs. Though Rajiv’s father advised him to buy a home insurance before moving into the flat, the couple did not pay heed to his advice.
Rajiv and Ankita is not the only couple who is skating on thin ice. It is sad to see that people spend lakhs or crores of rupees towards building and furnishing their homes, but when it comes to buying the home insurance, which protects what is possibly the most expensive asset of an individual, only a handful of people opt for it. There is a negligible acknowledgement
that damage to a home is not only financial but emotional also.
Some people avoid home insurance because they think it is an expensive policy. In the survey conducted by ICICI Lombard, 35% respondents said that they considered it as a costly insurance policy.
If it is the ‘pricing’ factor which is keeping you away from buying the home insurance, here are some great ways to cut premium and save on home insurance policy:
- Make sure you are not over-insured: Being under-insured becomes a problem when the calamity strikes, but being over-insured means you are wasting your precious money. So the ideal situation is that one should have the right amount of coverage.
Mainly, a home insurance policy has the following components:
- Cover for structure which can be computed by any of the below methods:
- Reinstatement value – It is calculated on the basis of built-up area of the house and the total construction cost
- Agreed value – It comprises area of the land and total cost of the property
- Indemnity value – It includes total construction cost and depreciated value of the house
- Cover for items: Choose items carefully which need to be insured. A 10-year old microwave might be working, but there is no point in insuring it at a depreciated cost. Also, disclose the correct value of all the insured items.
However, make sure your policy coverage is sufficient to replace structure and content. Saving a few rupees by reducing the coverage can prove costly in case of any loss or damage. Be prudent while deciding what to choose and what not.
- Increase deductibles: Deductible is the amount that you have to pay out of your pocket at the time of loss before the insurance company settles the claim. The higher the deductible amount; the lower will be your premium amount. However, remember to increase your deductible only as much as you can afford. Let’s say; your claim is Rs 30,000, and your deductible is Rs 25,000. Though, your premium would decrease in this case, but at the time of claim, you would require paying Rs 25,000, while the insurance company would pay only Rs 5,000. So don’t opt for a larger deductible amount just to reduce your premium, as it can defeat the entire purpose of buying the insurance.
- Combine covers: Comprehensive home insurance cover offers discounted rates. Most insurers offer discounts on the total premium if you opt for four different covers, and a 20% discount if you opt for six covers under the policy.
- Think long-term: It becomes cost-effective if you opt for a long-term plan, say for 10 or 15-year in one go. It will not only protect you from the hassles of renewing your policy now and then but will also cut the premium cost. Some insurers, offer 50% discount on long-term home insurance policies. Please check all terms and conditions before finalizing the deal.
- Install safety mechanisms: Insurers want to know about the safety equipment’s installed in your house. By installing safety mechanisms, you not only protect your home against different perils, but also get lower premium rates from the insurer. Because your home is less likely to be burglarized when you have a safety security system, insurance companies reward such homeowners with low premium rates.
- Don’t approach the insurer for smaller claims: While the purpose of the insurance is to cover losses or damages to your vehicle, skip the trip to the insurer for every small loss. A large number of claims will make you a risky customer for the insurer. Also, claims can drive up your insurance premium cost at the time of policy renewal.
- Be loyal to the insurance company: If you stick with the same insurance company for a longer duration say three to four years, you may get discounts for being a loyal policyholder. In most of the cases, insurance companies reduce the premium by 5-10%.
- Go online to buy the policy: Online policies are much cheaper than their offline counterparts due to the elimination of the agent’s role. As the agent is not involved, the insurer saves on commission and administration costs. This benefit is passed on to the customer in the form of low premium rates.
When searching for a good home insurance policy in India, remember that your goal should be to find the best policy in terms of coverage and not just the lowest price. Low premium rates from a company with low claim settlement ratio and terrible customer service can give you a stressful experience when you need your policy the most.