How Your Home Insurance Premium Is Calculated?

When people talk about their immovable assets, the first and foremost thing that comes to their mind is our home. Not just because of the costly investment that they forth to it, but also due to the emotional attachment they have with their house. That is exactly where the home insurance premium comes into play, so secure the shelter above us, by providing adequate coverage against our property and belongings in case of any unfortunate event.

This article is aimed at making you aware of the factors that the insurance company takes into consideration before providing you with the coverage.

Variation for the home insurance cost

Your home insurance coverage must pay you the right amount that shall be required for rebuilding the entire house from scratch in case of some mishappening. Keep in mind that the cost is certainly not the same you have paid while buying the house. Some of the reasons why Home Insurance Costs vary are as follows:

  • The insurance coverage is never the same as that of the price at which you bought the house. This is mostly because, during the purchase, the cost always includes the price of the land too.
  • The features and upgrades of your home are considered within the cost.
  • The rebuilding cost never considers the location and area where the building resides.

Parameters included for the calculation of your home insurance

1) Plan Type

In most of the cases, it boils down to the type of home insurance you are opting for. You can either insure your building or the contents within or both. For that of building, the valuation of the entire structure will only be taken into consideration, for contents likewise your possessions and personal belongings including vintage items and jewellery. If you want to choose a plan for both, the value shall be added as per to that.

2) Valuation of the building

When it comes to the valuation of the building, it is calculated over the reconstruction cost rather than the overall market value of the property. Coverage is provided for the minimum cost that shall be needed for the reconstruction of the entire building. The overall building value is calculated by multiplying the total area of the property with the construction rate per square feet. For instance, if your house is around 1000 sq. Ft. and the cost is 1200 Rs per sq. Ft., then the sun that shall be insured is Rs 12,00,000.

3) Valuation of the content

When it comes to the valuation of the content, it is you who need to specify the overall value of the jewellery and other valuable items, so that the insurance can pay off sufficiently for the entire replacement.

Calculation your home insurance premium

Once the calculation for the entire home insurance coverage has been done, it is now time to compute the premium cost that you shall be paying. In order to calculate the premium, you need to keep the following things in mind:

  • Ownership of the home: Whether it is rented or owned
  • Measuring the entire built-up area and the overall construction cost
  • The entire cost of personal belongings and contents such as jewellery and other valuables
  • Add-on covers with your home insurance like earthquake or flood covers according to the demographics

Final takeaway

Before wrapping up, it is very important to understand that, sometimes your home insurance might not be sufficient enough. It is always advised to consult with your insurance agent, to get the right value against coverage so that, in case of any mishappening, you won’t need to break your bank.