Home Insurance Policies are essential, especially if you are currently repaying your Home Loan.

To protect yourself from the risk of unexpected financial losses which can occur due to damages to your home and to prevent getting any further into debt, purchasing a Home Insurance Policy is a must.

Why is a Home Insurance Policy Necessary when you have a Home Loan?

Your Home Loan lender asks you to purchase a Home Insurance Policy because till you don’t finish repaying the loan your Home Loan lender also has a financial interest in your property.

When analysing Home Loan options, let’s assume you narrow down your search on HDFC Home Loans. After checking your eligibility on the HDFC Home Loan Eligibility Calculator and getting an estimate of your monthly EMIs using the HDFC Home Loan EMI Calculator, note that the home insurance charges are not included in this calculation.

Home insurance charges are mentioned to you along with loan processing fees and other charges. You can choose to either pay your home insurance premiums annually or monthly. Monthly home insurance premium instalments are also added to your HDFC Home Loan EMIs to calculate the total monthly amount that you have to pay. A similar procedure is followed by almost every home loan lender.

In case something happens to your property or it gets completely destroyed, the Home Loan still needs to be paid off. Simultaneously, you will also have to rent a place or buy a new house. Your Home Insurance Policy claim will cover the cost for restoring your property back to normal or pay-off your balance loan amount. This will reduce the financial strain on you.

Types of Home Insurance Policies

You can either opt for protecting just the structure of your property or include the internal contents also to obtain complete coverage.

This brings us to the two types of Home Insurance Policies that are available in the market:

  • Standard Fire and Special Perils Home Insurance Policy

A Standard Fire and Special Perils Home Insurance Policy covers the structure of your house against damage caused due to fire or natural disasters like earthquakes and storms. Many Home Insurance Policies also offer covers for terrorism for an additional premium.

  • Comprehensive Home Insurance Policy

A comprehensive Home Insurance Policy provides a cover for the contents of your home in addition to protecting the structure of your home the way a Standard Fire and Special Perils Home Insurance Policy does.

Coverage due to losses arising from theft and burglary are included in a Comprehensive Home Insurance Policy.

To save on insurance premiums, you can purchase your Home Insurance Policy for many years in advance.

Exclusions in Home Insurance Policies

Some important exclusions present in Home Insurance policies including HDFC Home Insurance Policy are:

  • A Home Insurance Policy does not provide a sum assured that pays off your Home Loan in case of death of the policyholder.
  • Any losses due to wear, tear and depreciation are excluded.
  • Damages due to wars and nuclear attacks, pollution and contamination are excluded.
  • Losses arising out of negligence.

You can also purchase a Home Insurance Policy with the benefits you require and make your Home Loan lender the co-insured of the policy. Once you finish paying off your Home Loan, the complete ownership of the policy can be taken over by you.