How can you get the best deal on home insurance and save money?

You have installed burglar alarm, locks and fire extinguishers, carried out a proper police verification of the domestic help and done everything to safeguard your house from risks or dangers. However, despite the safety mechanisms, you can’t rule out the possibility of theft and damage to your house due to perils like fire. Also, natural disasters, like earthquake, cyclone, flood, etc. come unannounced. While you can take all steps to protect your abode from various dangers, the reality is that houses are vulnerable to all types of dangers, including natural and man-made.

The extent of damages

Comparing to the not-so-effective precautions taken by you to safeguard your house, a home insurance policy would help you by providing 360-degree coverage. However, unfortunately, there are a few takers of home insurance policy in India. According to one of the home insurance surveys, 93% of respondents in India did not have a home insurance policy.

Disasters of any type often render many homeless or injured.  Buying a home can be an expensive proposition, considering the high real estate prices. This is one of the reasons why homeowners either do not buy home insurance or opt for a low coverage to save premium amount. If pricing is the reason for not buying home insurance, then here are some of the good ways through which you can get the best deal on home insurance and also lower your insurance premium without compromising on the benefits you get.

1. By choosing the insurance coverage carefully: While buying home insurance, it is pertinent to take into account the geographic area and your coverage needs. If your area is more prone to earthquake, opting for an earthquake add-on protection is a right move. On the other hand, someone living in a low seismic zone should go for a higher insurance coverage against natural calamities like cyclone, floods, etc.
2. By making sure you are not over-insured: Underinsurance is as bad as over insurance. Being underinsured means you would have to bear the portion of the loss, but being over insured means that you are wasting your precious money. Both the situations are bad, and therefore, it is imperative to go for the right amount of insurance coverage.

Mainly, a home insurance plan has the following two components:

Cover for structure: It includes the building or structure of the property. It can be computed by any of the below methods:

• Reinstatement value- It is computed on the basis of the built-up area and the total construction cost.
• Agreed value- It considers the area of the land and the total cost of the property.
• Indemnity value- It includes the total construction cost and the depreciated value of the property.

Cover for items:  It includes household items which you want to insure. You might have a 15-year old toaster of your grandmother in a working condition, but there is no point in insuring the same item at a depreciated rate.

For the correct coverage, it is imperative to disclose the correct valuation of all the insured items.Your policy coverage should be sufficient to replace the structure and content of the house in case of any mishappening.

3. By going for a higher voluntary deductible limit: A voluntary deductible means that you are ready to share the risk with the insurance company and pay a part of the damage before approaching the insurer. A high voluntary deductible minimises the risk to the insurer, and as a result, the insurance company offers the insurance policy at low rates. However, go for a high deductible only if you can afford it.

Let’s say your claim is Rs 40,000 and your voluntary deductible limit is Rs 30,000. At the time of claim, you would require to pay Rs 30,000 before the insurance kicks in. It is good to avoid the high deductible amount if you can’t afford it otherwise, it will simply beat the entire purpose of buying the insurance.

4. By going for a long term policy: By opting for a long term policy, you can reduce the premium on your home insurance policy as yearly premiums are tending to be high. A long-term policy, of say 10 or 15 years can cut your premium by almost half of what you will end up paying if you renew your policy every year.
5. By installing safety equipments: By installing safety mechanisms, you not only protect your house from perils like theft, burglary, etc. but also get lower premium rates from the insurer. Because your home is unlikely to be burglarized when you have safety equipments, insurers reward such homeowners with low premium rates.
6. By avoiding filing for smaller claims: Though the purpose of insurance is to indemnify you against losses/damages, skip the trip to the insurance company for every small loss. A large number of claims will only make you a risky customer for the insurance company who can charge a high premium at the time of policy renewal.
7. By showing loyalty towards insurer: If you stick to the same insurance company for a longer duration, say three or four years, you might be rewarded by the insurance company. In most of the cases, insurers reward their long-term policyholders with low premium
8. By buying insurance online: Online insurance policies are much cheaper than their offline counterparts. This is because the insurer saves on the distribution channel, infrastructure and other overheads and they happily pass on the savings to prospective insurance buyers.

Home insurance protects one of your valued possessions, ‘home’ against all types of man-made and natural calamity. By tweaking your insurance policy, you can get wider coverage at easy premium rates.So buy a comprehensive home insurance policy now and give your house the much needed protection.