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A major financial and personal decision like owning a home brings a lot of joy and responsibility as well. It becomes crucial to protect such an investment with the right insurance coverage. But before you can purchase a home insurance plan, it is important to determine your requirements, research all the options available, and understand how home insurance premium is calculated to make an informed decision and grab a good deal.

This blogpost describes the calculation process for home insurance premium and factors that impact home insurance costs among other things.

Home Insurance Premium Calculation Process

The process of how to calculate home insurance premium in India is explained below in brief so that you can have a basic understanding of the process:

  1. Analyse the Required Coverage

    The total coverage you seek in a policy is one of the most influential factors that affects policy premium rates. Here is how you can select some home insurance covers for a comprehensive coverage:

    • Determine Replacement Cost

      Replacement cost is the amount required to rebuild your home in case of a total loss. You can calculate this by assessing the cost of construction, labour, and raw materials as per current trends. To get adequate coverage, you need to calculate an accurate replacement cost.

    • Evaluate Personal Property Value

      The contents of your home, including furniture, electronics, and other items, usually cost a substantial amount. By considering the cost of personal belongings, you can determine the coverage required to protect your personal belongings in an unfortunate event.

    • Assess the Need for Liability Cover

      A liability coverage protects you in case someone gets inured on your property, or you accidentally damage someone else's property. You need to assess your requirement for such a coverage and the appropriate amount by looking at the potential risks.

    • Additional Covers

      If you possess high-value items and keep them in your home, it might be worth considering additional coverage. Additionally, seeking cover against water damage or identity theft may also be useful depending on you and your home's geographical location.

  2. Calculate Deductible

    The amount you pay in the event of a claim before the insurance coverage kicks in is called deductible. A higher deductible can reduce the cost of your premium, but it may increase your financial burden. However, if you have the financial capacity, consider opting for higher deductible to reduce your policy premium.

  3. Consider Home Security Measures

    Insurance providers see home security measures as a positive sign and these can lower the chances of a burglary, intentional damage to the property, etc., which consequently reduces the chance of a person raising a claim. You can consider installing security tools like smoke detectors, alarm systems, and deadbolt locks to reduce the risk of claims and consequently reduce your premium amount.

  4. Check Your Credit Score

    Insurance providers may use your credit score to assess the financial risk. By maintaining a good credit score, you may be able to lower your policy premium.

  5. Review Credit History

    If you have raised claims too often in the past, it may increase your premium costs. During future premium cost calculation, insurance providers consider your claim history.

The above-mentioned steps give you a basic overview of how home insurance premium is calculated. However, the exact figure will depend on various factors.

Factors Impacting Home Insurance Premiums

Several factors influence the calculation of home insurance premiums are listed below:

  1. Location of Your Home

    If you have a home in an area that has high-crime rates or is prone to natural disasters, the policy premium rates for such a home are high.

  2. Construction Materials Used

    The construction materials, especially those used for the roof and the exterior of the home, can impact your premium rates. Using fire-resistant materials may lead to low policy premiums.

  3. Home's Age

    Old homes are likely to have outdated systems, which poses a potential risk of issues; this can ultimately impact your premiums.

  4. Coverage Amount

    The amount of coverage you choose in your insurance plan for your home and personal property, for example, affects the overall cost of policy premium.

Tips to Lower Home Insurance Premiums

Now that you have a basic understanding of how home insurance premiums are calculated, it may be helpful to learn a few tips to lower it.

  1. Bundle Your Policies

    One of the most effective ways to enjoy low premium rates is to combine your home insurance with other policies, such as motor insurance. You can do this by getting all your insurance plans from the same insurer.

  2. Raise Your Deductible

    If you have the bandwidth, you are recommended to increase your deductible to reduce your premium rates.

  3. Review and Update Coverage Regularly

    By periodically reviewing and updating your coverage, you can attune it to reflect changes in the value of your home or possessions. This is important to ensure that you have adequate coverage without paying extra.

To Sum it Up

Having a basic understanding of how home insurance premiums are calculated is crucial for homeowners to get a comprehensive coverage at fairly reasonable prices. Before finalising an insurance plan, you are advised to go through the policy documents to grasp every step of the home insurance claim process with a home insurance plan.

You can explore different insurance policies such as the Bharat Grih Raksha Policy and choose the one that is most suitable for you.


How is premium calculated in home insurance?

Different factors, including the cost of your home, home security features, and deductibles, contribute to the calculation process of your home insurance premium.

How can I lower my home insurance premium?

You can install home security features, increase your deductibles, bundle different policies, and maintain a good credit score among other things to lower your policy premium.

What does the location of my home have to do with home insurance premium?

The high risk of crimes or natural disasters associated with certain areas can increase the insurance premium rates of homes in such areas.

What is the effect of deductibles on insurance premium?

By choosing to pay a higher deductible, you opt for sharing the financial responsibility in your home insurance plan. This decreases your premium rates.

How much coverage should I choose for my home?

In addition to the replacement cost of your home, you are advised to seek cover for your personal belongings, potential liabilities, etc.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.

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