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How Is Home Insurance Calculated

By Finserv MARKETS - Jan 20,2020
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How Is Home Insurance Calculated

With an ongoing augmentation of the climate crisis, we have become prone to catastrophic events more than ever before. Natural calamities today have a heightened probability of occurrence and man-made disasters add to this destruction of life and property. According to a Global Climate Risk Index Report, India is amongst the top 15 most vulnerable countries in the world when it comes to being affected by disasters. Floods result in the costliest of property damage, with around 40 million hectares of land in India being exposed to this calamity as per the National Disaster Management Authority.

By such means, your most valued investment – your home – becomes susceptible to this risk as much as your lives. This is where Property Insurance, especially Home Insurance, comes into the picture in order to mitigate the financial crisis resulting from the loss and damage.

Understanding home insurance

Home Insurance is a tool to provide financial security to your residential property in the wake of destruction caused by a natural disaster, man-made disasters or other specific hazardous events. This policy acts as a form of a safety net for house owners as well as tenants, as it prevents you from major financial setbacks that can result from unfortunate catastrophes.

Why must you opt for a home insurance plan?

Massive time, effort and financial investments are required to purchase and/or build a dream home. Your home becomes your most important possession. It is only fair to secure the property in case of any damage due to unforeseen events like natural disasters, accidents, burglary or fires. Home insurance provides you with sensible coverage to alleviate such burdens. Some home insurance policies also cover temporary living expenses, including the cost of rent for temporary rehabilitation, for the duration of any renovation that the property is undergoing. Your personal belongings which are present inside the property are also eligible for an insurance cover in case of damage or loss. If a guest, any third party or you incur injuries, some home insurance policies will also cover the same. All of these reasons make home insurance a viable option for you to financially secure your home.

Calculation of home insurance cost

Before choosing a home insurance plan, you must do your homework leading to home insurance calculation. Let’s understand the various methods used to calculate home insurance.

Calculation method used

Many consumers assume that the amount of home insurance coverage is equal to the amount paid for the house by them. However, there are actually three ways of calculating your home insurance coverage amount. These three methods are: (1) Market Value Method (2) Replacement Value Method and the (3) Fixed Value Method. Let us examine in detail what each of these methods are:

  1. Market Value Method: Simply put, Market Value method is this: the insurance provider will pay you the cost of the house and/or its articles, as it was when you initially purchased it. Depreciation will also be factored into the mix.
  2. Replacement Value Method: This method accounts for the cost it will take to rebuild the house with the same structural aspects at today’s market value. For instance, Bajaj Allianz Home Insurance available on Finserv MARKETS calculates the value of your home structure using the Replacement Value Method. The formal to calculate the value of home insurance using this method is Sum Insured = Built-Up Area x Cost of Construction per sq. ft.
  3. Fixed Value Method: The Fixed Value Method refers to a fixed value or a predetermined sum of money that you can claim if your house undergoes damages. Market prices or depreciation is not taken into account in this method.

Finding a suitable home insurance coverage

To understand the best home insurance coverage plan that caters to your need, decide whether you would want to insure your Home Building, or Household Articles, or both. Insurance coverage plans also vary for different types of users – landlords, house owners and tenants. You must compare many home insurance plans before reaching a conclusion in order to find the most suitable plan in accordance with your financial budget and your rationale behind the coverage. Online forums and discourse with existing customers of different home insurance providers can help you make the right decision for you and your loved ones. Choose Bajaj Allianz Home Insurance available on Finserv MARKETS for extensive coverage at affordable premiums and to financially secure your property today.

Once you have landed upon a specific home insurance coverage plan and method, it’s time to understand the calculation of affordable home insurance premiums.

How Is Home Insurance Calculated

Source: Bank Bazaar

Important factors affecting home insurance premium

The calculation of home insurance premiums is based on a variety of factors. The type of homeownership, rented or owned, impacts the home insurance premium. The location of the property also affects this cost. The construction value of the property is taken into consideration, too. Apart from these three factors, it is significant to note that the Household articles and belongings including jewelry will impact the home insurance premium cost. Additionally, at times the duration of the policy also factors into the calculation of your home insurance premiums.

You must try to incorporate preventive measures to be prepared in case of a disaster. Smoke detectors, security systems, etc. can help you reduce your premium cost. An in-depth comparison between various plans available in the market will help you to make an informed decision and help you avail comprehensive coverage at low costs. Availing discounts on the home insurance premium is also an option that you must discuss with your insurer. If you think you may require add-on covers that might not be a part of the main insurance policy, do not hesitate to subscribe to those as well.

You can consider opting for an insurance policy with Bajaj Allianz Home Insurance on Finserv MARKETS, a trusted financial partner. Quickly receive the insurance policy without any tedious paperwork and get extensive home insurance coverage at affordable premiums. Secure your home, your most treasured asset, with a tailor-made home insurance plan today.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor-made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no-cost EMIs to 4 hours of product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522