Tenants should primarily buy contents insurance.
'This covers personal belongings like electronics, furniture, clothes, and appliances against risks such as fire, theft, floods, and other natural calamities.
Home insurance policies nowadays are highly modular.
In SBI General's Flexi Home Insurance, for instance, only fire cover is mandatory. Customers can thereafter select whatever cover they need.
To do this, however, landlords and tenants must be aware of the cover that are relevant to them.
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Must-have cover for landlords
Landlords must insure their buildings.
"It should be insured against perils such as fire, earthquake, storm, flood, landslide, riot, terrorism, and so on," says Subramanyam Brahmajosyula, chief product and marketing officer, SBI General Insurance.
Contents insurance is essential if the property being rented is furnished.
"The cover could include furniture, appliances, and any other items belonging to the landlord that are on the rental premises," says Ashwini Dubey, head of home insurance, Policybazaar.
Loss of rent insurance is useful, especially for landlords who are completely dependent on such income.
"If the property becomes uninhabitable due to damage, this cover replaces the lost rental income until the property is repaired or restored," says Dubey.
Bharat Griha Raksha, the standard home insurance policy, offers comprehensive protection.
"It provides coverage for the house structure. The contents of the house are automatically insured for 20 per cent of the sum insured. Customers can also purchase an add-on cover for loss of rental," says Gurdeep Singh Batra, head - property underwriting (E&S), risk-engineering services, global accounts, Bajaj Allianz General Insurance.
Buy right sum insured
The sum insured should be based on the reinstatement value.
This means the insurance policy covers the cost of rebuilding or reconstructing the house to its original condition at the time of policy commencement.
"Unlike market value-based insurance, reinstatement value does not consider depreciation as a deduction due to time or wear and tear," says Batra.
"It offers more comprehensive protection, allowing homeowners to restore their property without financial setbacks," Batra adds.
Exclusions for landlords
Landlords should be mindful of what home insurance does not cover.
"Major exclusions include loss or damage caused due to war, wilful acts by the insured or their family members, and consequential losses," says Brahmajosyula.
Consequential loss refers to indirect financial loss arising from an insured event.
Damage caused by pollution or contamination is excluded.
"High-value items such as bullion, unset precious stones, manuscripts, and explosive substances are generally not included in the policy coverage unless declared separately," says Batra.
Structural alterations exceeding 10 per cent of the carpet area are not covered.
"Damage due to rusting, corrosion, and ageing of the property is not covered. Damage caused by pests is generally not covered," says Dubey.
Design flaws and construction defects are also excluded.
"Most policies have clauses about the property needing to be occupied to remain covered," says Dubey.
Construction or renovation requires the purchase of a specific cover. Without it, claims for damage during such periods may not be honoured.
Key covers for tenants
Tenants should primarily buy contents insurance.
"This covers personal belongings like electronics, furniture, clothes, and appliances against risks such as fire, theft, floods, and other natural calamities," says Pankaj Verma, chief technical officer - products & underwriting, Zurich Kotak General Insurance Company (India).
Tenants should also purchase liability cover.
"This protects them in case they unintentionally cause damage to the landlord's property," says Verma.
Buy a cover for valuables on an agreed-value basis.
"Declare these valuable items to the insurer at the time of policy commencement to ensure proper coverage," he says.
How to value contents
Tenants can assess the sum insured either item-wise or in bulk.
"For high-value items like electronics or jewellery, item-wise calculation based on purchase price is advisable.
"For bulk household items, a reasonable estimate of the total value works well," says Verma.
Batra suggests valuing the contents on the purchase price rather than the depreciated value.
"Declare valuable items to the insurance company at the time of policy commencement to ensure proper coverage," he says.
He also recommends storing receipts and photographs of major items in digital format, as these could be useful in making a claim.
Key exclusions
Home insurance for tenants comes with several exclusions.
"These include intentional acts causing damage to the insured property by the insured, their family members, or domestic staff.
"Exclusions also include irregular wear and tear, war and war-like operations, and costs incurred in claim preparation," says Brahmajosyula.
Verma adds that acts of negligence, undeclared high-value items, and damage during relocation (unless transit cover is included) are also excluded.
Mistakes to avoid
Many buyers underinsure their assets, which exposes them to financial losses.
Failure to declare expensive belongings is another common mistake.
"Jewellery, electronics, or branded clothing should be backed with purchase invoices or receipts to ensure proper protection," says Batra.
Brahmajosyula points out that buyers often omit material facts, including past claims, or fail to update policies after home renovation or extension.
Cost of securing your home for five years
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Feature Presentation: Ashish Narsale/Rediff.com
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