Some years ago, my aunt’s flat in Delhi was gutted in a fire. She assumed the Resident Welfare Association (RWA)’s building insurance would take care of things. It did not.
She struggled to obtain a copy of the policy and, when she did, discovered the coverage was far narrower than expected. It covered only the outer building structure. Her interiors—modular kitchen, flooring, fittings—were not covered.
Then there was underinsurance. The building was insured well below its actual replacement cost. So even the structural claim would have been settled at a fraction of the real loss. The RWA was focused on its own losses; her personal loss was not their priority.
Her experience is not unusual.
The coverage gap
Most apartment owners in India carry no home insurance of their own. They assume the building association has it covered. That assumption is worth examining.
An RWA typically insures the structure of the building and common areas. What it seldom covers is what sits inside your flat—your contents and interiors. A modular kitchen alone can cost ₹5–10 lakhs. Other interiors can easily exceed ₹20–30 lakhs in a mid-to-large apartment.
Even for the structure, RWA insurance often suffers from underinsurance. Buildings are insured at outdated valuations, and when claims arise, settlements are proportionately reduced.
In large losses, RWAs and insurers manage complex multi-party claims. Your flat is one line item in a much larger negotiation. Claim settlements in home insurance—even straightforward cases—can take many months.
That’s why you must buy your own home insurance.
Structure vs market
A personal home insurance policy covers the structure of your flat, interiors and contents.
For the structure, you can insure on a reinstatement or agreed value basis.
Reinstatement value pays to rebuild. Some insurers offer agreed value options that let you insure the apartment at its market price, typically based on circle rates or a valuer’s report.
If your flat becomes uninhabitable, an agreed value policy gives you the money to buy a different home rather than rebuild. In some agreed value policies, you can surrender the damaged apartment to the insurer and receive the full insured value.
Agreed value policies are not subject to underinsurance. You will not face proportionate reduction in your claim even if the value of your home increases.
The premium difference between the two options is not prohibitive.
Take a flat in NCR currently worth ₹5 crore, with a construction cost of around ₹2 crore. A reinstatement policy covering the ₹2 crore construction cost might cost ₹6,000–8,000 a year. An agreed-value policy covering the full ₹5 crore market value would cost roughly ₹13,000–18,000 a year.
Blind spot: sum insured
The sum insured is a blind spot for most home insurance buyers.
Some policies offer optional sum insured escalation each year, but terms vary and may not keep pace with sharp cost increases.
Someone who insured their NCR apartment for ₹2 crore on an agreed-value basis several years ago may now own a flat worth ₹5 crore. In a total write-off, the ₹2 crore sum insured would be insufficient to buy a similar home.
Review your home insurance sum insured every two to three years.
For contents, prepare a proper inventory with approximate costs. This can save months of delay when filing a claim.
For renters too
Renters often assume home insurance is not for them. It is.
You may not own the walls, but you own what’s inside. Renter’s insurance—also called content-only insurance—covers belongings against fire, theft and other specified perils.
Premiums are low, often a few thousand rupees a year for cover of ₹5–10 lakhs. It is an underused but cost-effective insurance.
Renters should not insure the building structure itself since they have no insurable interest in that.
Policy conditions
Home insurance policies contain important conditions.
If your apartment is used for short-term commercial rental arrangements, cover may be excluded under a standard policy. Report any change in use or occupancy.
If you will not occupy the apartment for an extended period, check policy terms and inform your insurer.
If you renovate in a way that changes your apartment’s area, inform the insurer. Some policies specify that changes beyond a certain threshold require an endorsement and additional premium.
Unlike health insurance, where only the unutilised sum insured remains after a claim, home insurance is often restored to the full sum insured after a claim is settled. The insurer charges a proportionate additional premium for this restoration, usually deducted from the claim payment itself. It is a useful feature.
Getting back to my aunt: she has since bought her own home insurance policy with adequate contents cover and sum insured. It costs a few thousand rupees a year.
She says the fire was an expensive but valuable lesson.
Kapil Mehta, co-founder, SecureNow Insurance Broker
