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  • How do you Calculate Home Insurance Costs?

    A home insurance cost calculator will determine how much coverage you should opt for when you are insuring your home. This will help you find out the right amount of coverage that you should have to protect the content and structure of your home from perils like fire, hail and man-made mishaps like impact damages. This amount is calculated on the basis of the area, cost of contents, value of building and other such factors.

    Introduction to Home Insurance Cost Calculation

    When you speak of all the assets that you own, the first thing that comes to your mind is your home. Not just because it is a costly investment but because it shelters your loved ones, a home will always be your most dear asset. To guard your home and your contents against any unforeseen event, it is always advisable that you secure a comprehensive home insurance policy. Most importantly, you must opt for a home insurance scheme that adequately covers your property and personal belongings.

    If you are worried about how to calculate the insurance coverage that you need your home, read on further to find more about home insurance cost calculator that will help you find the right home insurance cover.

    Why does the Home Insurance Costs Vary?

    The right home insurance coverage must be set at an amount adequate enough to rebuild your house from the ground up in case of a loss or damage. This cost is not equal to the amount that you paid for the house because of the following reasons.

    • The home purchase price includes the land cost also. But since you won’t have to repurchase the land, the insurance coverage cost will include the cost of land.
    • The calculators takes into consideration the features and upgrades of your home.
    • The rebuilding cost will not be influenced by demands for desirable features like good area, premium location etc.

    Parameters in Calculation of Home Insurance Coverage

    The home insurance coverage cost is decided based on all or some of the following parameters.

    • Plan Type

      The home insurance coverage will depend on if you are insuring the building only or the contents only or both. If you select building only, the value of the home structure will be taken into consideration. For contents, the value of personal belongings and jewelry will be considered. For a plan that encompasses a comprehensive cover for both contents and building, the value of both building and contents will be added.

    • Value of the Building

      The value of the building is the reconstruction cost and not the market value of the property. An optimum coverage should adequately compensate for the rebuilding cost. To find the building value, the built-up area of property and the construction rate per square feet will be multiplied.

      For example, if the built-up area of your home is 1200 sq.ft and the construction cost is Rs.1,500 per sq.ft, the sum insured for the building structure will be Rs.18,00,000.

    • Value of Contents and Jewelry

      While calculating the home insurance coverage costs, you must also specify the value of contents and jewelry. The insurance must be able to sufficiently cover the costs of replacement.

    How to Calculate Home Insurance Premium?

    After you have calculated the home insurance coverage, you must also compute the premium costs for the home insurance scheme. The premium is calculated based on the following.

    • Type of home ownership - if it is rented or owned.
    • The sum insured which is calculated based on the built-up area and construction cost
    • The cost of contents and belongings including jewelry
    • Add-on covers opted like terrorism cover or all-risk jewelry cover.

    In conclusion, only insuring your home is not sufficient - you must insure it for the right amount of coverage so that you don’t have to burn a hole in your pocket in case of an unexpected mishap.

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