Insuring your flat

A flat divides into two insurable things: the building around you, and everything inside your own walls. Most buyers insure neither, assuming the builder’s handover, the association, or the home loan has it covered. Often none of them does.

India has one compulsory standard for insuring a home against fire and the perils around it: IRDAI’s Bharat Griha Raksha. Every general insurer must offer it, on wording no insurer is allowed to change. This guide works through what it actually covers, how much it insures your flat for – which is not what you paid for it – what your lender can and cannot insist on, what your association is separately covering, and what a claim looks like from the first phone call to the money landing in your account.

The standard home policy

IRDAI introduced Bharat Griha Raksha in January 2021 to replace the older Standard Fire and Special Perils policy for dwellings, effective from 1 April that year. Every general insurer must offer it, mandatorily, for every new dwelling and every renewal, and none may alter its wording: an insurer may only delete an optional cover you did not choose. Whichever company you buy it from, the promise underneath the branding is identical.

The policy covers physical loss, damage or destruction to your home building and contents from a named list of events: fire, explosion or implosion, lightning; storm, cyclone, typhoon, tempest, hurricane, tornado, tsunami, flood and inundation; earthquake, volcanic eruption and other convulsions of nature; subsidence, landslide and rockslide (with carve-outs for ordinary settlement or defective building work); bush, forest and jungle fire; impact damage from a vehicle, falling tree, aircraft or similar; riot, strikes and malicious damage; acts of terrorism; bursting or overflowing water tanks and pipes; leakage from automatic sprinklers; and theft within seven days of, and caused by, any of the above.

What it excludes

Beyond the perils table, the standard wording rules out: your own deliberate act; war and war-like operations; nuclear or radioactive contamination; pollution that neither causes nor is caused by a covered event; an electrical or electronic item breaking down from overrunning or a short circuit, rather than from an insured peril; property that has simply gone missing with no event behind it, or that was removed from your home before the loss; consequential loss such as lost earnings or a lower market value after repair; and the cost of preparing your claim itself. None of these are unusual for a fire policy, but they are worth reading once, before you need to rely on the policy rather than after.

What your sum insured means

Home building and contents must be insured on a reinstatement or replacement basis: what it would cost to rebuild or replace them, not their market value. Insuring either on market value is not permitted at all. That matters, because your flat’s price includes the land under it, the builder’s brand and the amenities on offer, and none of that burns down. The sum insured an insurer will actually write is your home’s carpet area under the policy’s own definition – which counts balconies, verandahs, terraces and parking at 25% of their area, and excludes external walls and service shafts – multiplied by a cost of construction per unit area that you declare and the insurer accepts. You can insure for more than that figure; you cannot insure for less.

Say your flat measures 1,200 sq ft (about 111 sq m) of carpet area under this definition, and your insurer accepts a construction rate of ₹3,000 a square foot – an assumption here, not a published rate, since insurers do not publish one. That puts your building’s sum insured at about ₹36 lakh, regardless of what you paid for the flat itself.

A long-term policy also escalates the building’s sum insured on its own, 10% a year on the original figure, with no extra premium, up to a ceiling of double the starting amount. IRDAI’s own example shows the shape of it: a sum insured of ₹10 lakh at inception rises to ₹11 lakh by the first anniversary, ₹12 lakh by the second, ₹13 lakh by the third, and on to a maximum of ₹20 lakh, all without your paying anything more for the increase. An annual policy gets the same 10% a year, added in daily instalments instead of in one jump.

What contents cover includes

Once you insure the building, general contents – furniture, appliances, clothing and the like – are automatically covered for 20% of the building’s sum insured, capped at ₹10 lakh, unless you specifically opt out. On the ₹36 lakh building above, that is about ₹7.2 lakh of automatic cover; insure a bigger building and the cap bites once 20% would exceed ₹10 lakh. You can also declare a higher contents sum insured yourself, with details, if ₹10 lakh is not enough.

Jewellery, art and other valuables sit outside general contents. They need the optional Valuable Contents cover, on an agreed value you declare; a formal valuation certificate is waived only if the sum insured for valuables is up to ₹5 lakh and no single item is worth more than ₹1 lakh. A second optional cover pays ₹5 lakh each for the insured and their spouse if an insured peril causes death, alongside damage to the home.

Built into the base policy at no extra cost: loss of rent and the cost of alternative accommodation while your flat is not fit to live in after a covered loss, removal of debris, and an architect’s, surveyor’s or engineer’s fees. A policy can run up to 10 years; each insurer sets and publishes its own minimum premium, and any add-on it files on top of the standard cover cannot cost more than half the base premium.

Your lender and your insurer

A bank selling insurance as a corporate agent must not force you toward a particular insurer’s product or tie the sale to a banking facility, and its marketing has to say plainly that buying insurance is voluntary and not linked to anything else you are getting from it. Our home-loan guide covers what that means for the loan itself and how the premium shows up in the Key Facts Statement.

What a bank can insist on is that the flat is insured at all, as security for its loan – that is common practice, not a rule this guide can find. If your flat is mortgaged, the policy schedule will carry an “Agreed Bank Clause” naming the bank, a standard clause built into Bharat Griha Raksha for exactly this, rather than a separate product. Choosing which insurer writes that policy is still yours to make.

Property cover or loan cover

Lenders often sell a second kind of policy alongside the property cover, and the two do different jobs.

The distinction matters because one does not stand in for the other. A flat fully covered by loan protection can still burn down with no payout to rebuild it; a flat fully covered by property insurance leaves your loan exactly where it was if something happens to you. Most buyers need some of each, bought separately and understood separately.

What the association insures

Once your building has an apartment owners’ association, the Karnataka Apartment Ownership Act, 1972 gives its manager or board the power – not an automatic duty – to insure “the property” against fire and other hazards, if the declaration, the bye-laws, a majority of owners, or a bank with a first mortgage asks for it. That cover is held in the manager’s or board’s name as trustee for every owner, in the share fixed by the declaration, and the premium is a common expense everyone pays through maintenance. The same section is explicit that this is “without prejudice to the right of each apartment owner to insure his own apartment for his benefit” – the association’s policy was never meant to be the only one.

If the building is damaged or destroyed and the association has not decided to repair, reconstruct or rebuild within sixty days, the Act treats the owners as holding the property in common instead, and any insurance payout is pooled with the sale proceeds and divided by each owner’s share. Ask to see the association’s own policy, or its bye-laws’ requirement to hold one, before you assume the building shell is covered: the Act empowers the association to insure, it does not compel it to.

Seismic zone, and the premium

Bengaluru sits in Seismic Zone II, the lowest of the four zones the Bureau of Indian Standards defines in IS 1893 – Zone V is the most active, Zone II the least. The Ministry of Earth Sciences confirmed the city’s zone in a 2017 parliamentary reply that reproduced the Bureau’s own list of cities. Earthquake is still a named peril under Bharat Griha Raksha regardless of zone, and nothing about Zone II removes the cover; it is one input among several into how insurers price and reinsure the risk, not a reason to skip the earthquake cover a standard policy already includes.

No official source gives a typical premium, and this guide will not invent one. What actually decides it: the sum insured you declare, built from your carpet area and the construction rate you and the insurer agree on, not your flat’s price; whether you add contents beyond the automatic 20%, valuables, or the personal-accident cover; any innovative add-on your insurer has filed on top of the standard product, capped at half the base premium; and each insurer’s own minimum premium, published in its prospectus. Two insurers pricing the identical standard cover can still land on different premiums.

Making a claim

Before you buy

• Insure on reinstatement value: your carpet area under the policy’s own definition, times a construction rate you agree with the insurer – not your flat’s price.
• Check what the automatic contents cover actually gives you, and declare a higher figure if ₹10 lakh would not replace what you own.
• Add Valuable Contents cover if jewellery or art matter to you; general contents does not reach them.
• Choose your own insurer: a bank can require that the flat is insured, not which company insures it.
• Buy loan protection separately from property cover, and understand that one does not do the other’s job.
• Ask your association what it actually insures, and at what sum insured, before assuming the building shell is covered.
• Keep the claim clock in mind: notify at once, claim within 30 days, and expect a surveyor within a day.