• It requires numerous years of diligent effort and saving to purchase a property. For many, property is not merely a physical structure; rather, it embodies their aspirations materialized. Any harm to the property results in psychological distress and, naturally, will also cause financial strain. To protect oneself from any loss, the most prudent action is to acquire property insurance. With property insurance, the owner is safeguarded against substantial financial loss that may occur due to theft, fire, storm, flood
• , lightning, etc. This insurance covers the property itself along with all its contents, which include furniture, electronic appliances, jewelry, and clothing. The policy is available for both commercial and residential properties.

• In this article, we will explore everything you need to understand regarding property insurance and how the premiums for property insurance are calculated.

Types of Insurance for Property

Below are some of the primary types of property insurance that can be purchased:

1. Homeowners’ Insurance
   Homeowners’ insurance is one of the most prevalent types of insurance and also the most widely purchased in India. This policy protects a residential building or housing property against any financial loss. Furthermore, many lending companies and financial institutions require house owners to obtain this insurance if they wish to finance the home.
   
2. Commercial Property Insurance
   As the name implies, this insurance is designed for commercial properties, and under this policy, warehouses, offices, restaurants, shops, factories, etc. , can all be insured. All businesses should carry this insurance to safeguard their working capital in the event of any loss or damage to the premises or their contents.
   
3. Renters’ Insurance
   Tenant or renters’ insurance is akin to homeowners’ insurance but is specifically intended for individuals living in rental accommodations. This policy covers the personal belongings of tenants in the rented space.
   In addition to the aforementioned types, property insurance can also include fire insurance or a natural disaster insurance policy.

Factors Affecting Premium for Property Insurance

The premium for property insurance primarily depends on the coverage it offers. Several factors influencing the premium calculations are:

• Kind of Property
  As mentioned previously, various types of properties can be insured under the policy. A property may be classified as commercial or residential. The former generally involves a higher risk compared to the latter, resulting in a higher insurance premium. The risk factor here significantly influences the determination of premiums.
  
• Value of the Contents
  Property insurance essentially encompasses coverage for both the building and its contents. Therefore, these two components serve as the foundation for premium calculations among other considerations. A comprehensive property policy will encompass items such as electronic appliances, jewelry, furniture, and fittings, particularly for residential buildings. Conversely, for commercial establishments, the contents may consist of machinery, inventory, raw materials, etc.
  
• Value of the Structure
  The worth of the property is another crucial element that influences the property insurance premium. The assessment of the structure’s value is carried out based on construction rates per square foot, super built-up area, and the property’s location. Size alone does not determine value; therefore, two properties of equal area may have different valuations.
  
• Stock Value
  The worth of the inventory or merchandise is referred to as stock value. This can include semi-finished products, finished items, stock on invoice, work in progress, raw materials, and packaging material, among others. All of these are under the insured’s responsibility, and thus, their value impacts the premium.
  
• Sum Insured
  For an insurance policy, the maximum coverage limit provided to the insured is known as the sum insured. This represents the highest amount that can be claimed in the event of an incident. The premium is elevated for properties with a higher sum insured. Selecting the appropriate sum insured is vital to prevent being over-insured or underinsured.
  
  How to Calculate Premium
  
  There is a tool available for calculating fire insurance premiums, which can also be used for determining property insurance premiums. An approximate figure can be derived that indicates the amount necessary for property insurance. These insurance premium calculators are user-friendly and very practical. A few basic details about the property need to be provided. Information such as size, type, structure value, built-up area, stock value, and contents value must be analyzed. These are the elements that will influence the premium cost. Upon entering this information, an approximate amount of the payable premium can be obtained.
  
  Things to Remember
  
  When purchasing property insurance, several key aspects should be considered:
  ● If you reside in rented housing, comprehensive property insurance cannot be obtained. Insurance can only be secured for the contents of the house.
  ● The sum insured should be selected carefully, keeping in consideration the structure’s cost and the contents’ value. This is crucial to ensure you do not pay extra premiums due to over-insurance or be inadequately covered due to underinsurance, particularly when making a claim.
  ● To lower your premium, you might choose a higher deductible or opt for basic coverage. Moreover, installing anti-theft devices, etc. , can help mitigate risk and thus reduce the premium.
  ● Do not use the purchase price of the house as the sum insured. Instead, utilize the cost of construction and the contents’ value.
  
  Conclusion
  
  Acquiring property, whether residential or commercial, is a challenging endeavor, especially in today’s market with soaring property prices. Additionally, various factors contribute to the heightened risk associated with owning and maintaining a property. In this context, one crucial aspect that is frequently overlooked but remains significant is property insurance.