Must-Know Terms Before Buying Home & Property Insurance

Buying a home is a big moment in life. As you wouldn’t skip checking the builder’s background or the property papers, understanding your home insurance policy terms is equally important. After all, it’s about protecting one of your biggest investments. 

So, before you sign that policy document, let’s walk through the key terms and definitions you should know.

14 Key Property and Home Insurance Terms to Aquint Yourself With

Property insurance is a vast category that includes coverage for homes, commercial buildings, and other physical assets. Here’s a quick breakdown of the terms often used in this context:

• Premium

Premium is the amount you pay (usually annually) to keep your policy active. Factors that may affect your premium amount include:

• Location of the property
• Type of construction
• Sum insured
• Add-on covers selected

• Policy Period

This is the duration for which your policy remains valid. Most home insurance policies are issued for one year but can be extended.

• Reinstatement Value

It refers to the cost of rebuilding or repairing the insured property with similar materials without factoring in depreciation.

• Ideal for insuring the structure of your house
• Gives you full replacement without loss of value over time

• Market Value

• Market Value = Reinstatement Value – Depreciation

This amount is often lower than the reinstatement value. It is mostly used for calculating claims on older properties.

• Structure Cover

This protects the physical structure of your home—walls, floors, roof, kitchen, and bathroom fittings. It’s especially important for homeowners as this is your core asset.

Includes:

• Foundation and walls
• Electrical fittings and plumbing
• Kitchen and bathroom units

• Contents Cover

This protects the belongings inside your home. Ideal for both owners and tenants.

Examples of contents covered:

Tip: Always prepare an itemised list of your belongings and estimate their value honestly.

• Personal Accident Cover

Some home insurance plans offer an optional add-on for personal accident cover. It provides financial protection for the policyholder or family members residing in the house in case of physical injuries resulting from events like fire or natural disasters.

• Natural Calamities and Man-made Risks

Most comprehensive policies protect your home from a variety of events. You’ll often see these listed as:

Covered Natural Calamities:

• Earthquakes
• Storms
• Floods
• Cyclones

Man-made Risks:

• Fire
• Theft
• Riots
• Burglary
• Always check which of these are covered in your policy.

• Exclusions

Exclusions refer to things not covered under your home insurance policy. Understanding this list is as important as knowing what is covered. Common exclusions may include:

• Wear and tear
• Damage from poor maintenance
• War or nuclear incidents
• Make sure you go through the exclusion section in detail.

• Indemnity

This means that the insurer will put you back in the same financial position as before the loss—nothing more, nothing less. You won’t make a profit from a claim, but you won’t lose either.

• Deductible/Excess

This is the amount you agree to pay from your pocket at the time of a claim. The insurance company pays the rest. Choosing a higher deductible can minimise your premium, but it also means bearing a larger share of the cost if you make a claim.

• First Loss Cover

Useful when you don’t want to insure all items but only a percentage of the total value. For example, if theft is the main concern, you can cover 60% of your contents based on the expected risk.

• No Claim Bonus (NCB)

NCB is a reward offered for not making any claims during the policy year. It usually comes in the form of a discount on your renewal premium. Some insurers even let you carry it forward if you switch providers.

• Add-on Covers

You can include these optional benefits in your plan by paying a higher premium. Popular add-ons include:

• Temporary resettlement cover
• Key and lock replacement
• Pet cover
• Loss of rent or rent for alternate accommodation

Before you buy a home insurance policy, take a moment to understand what it includes—and what it doesn’t. Policy documents may seem jargon, but knowing key terms can help you ask the right questions and make a smart decision. It’s not just about comparing premiums but also about ensuring your policy gives you the protection you need. So the next time you review a home insurance plan, you’ll know exactly what to look for.

Keep this list handy, ask questions, and don’t hesitate to clarify terms with your insurer.