Building Insurance

Building insurance is a type of property insurance that provides financial protection for the physical structure of a building—this includes the walls, roof, floors, foundation, and permanent fixtures such as fitted kitchens and bathrooms. It is applicable to both residential and commercial properties.

Types of building insurance plans

Structure-only: Covers just the building.

Contents-only: Covers only the belongings inside.

Comprehensive: Covers both the building and its contents, with options to include valuables like jewelry or cash.

What are not covered in building insurance

Wear and tear, depreciation, and gradual deterioration: Regular use, aging, or lack of maintenance.

Intentional or willful damage: Deliberate damage by the policyholder, residents, employees, or tenants.

Faulty design, materials, or workmanship: Construction defects or poor-quality materials.

War, civil unrest, and terrorism: Damages from war, invasion, civil commotion, or acts of terrorism unless specifically covered.

Nuclear risks and radioactive contamination: Loss or damage from nuclear incidents.

Mildew, mold, pests, rodents, or vermin: Damage due to infestation or fungal growth.

Sewer backup and water leakage: Not covered unless additional coverage is purchased.

Business activities and equipment: Loss or damage to business-related equipment or liabilities from commercial activities at home.

Earthquake, landslide, or other earth movements: Excluded unless you buy additional cover.

Pre-existing damage: Damage or defects existing before the policy started.

Unoccupied homes: Claims may be denied if the property is unoccupied for 30–60 days.

Cash, documents, jewelry, works of art, and valuables: Not covered unless specifically insured.

Vehicles and property in transit: Vehicles licensed for road use and items moved outside the premises.

Land, pavements, and external infrastructure: Land value, pavements, and external lines unless specifically included.

Properties under construction or demolition: Excluded unless specifically covered.

Loss due to lack of sufficient capital or business interruption from order/lease cancellation: Financial losses from business disruptions.

Cosmetic or superficial damage: Damage that does not affect the structure or function of the building.

Kutcha construction: Temporary or non-permanent (kutcha) construction is generally not covered.

Eligibility Criteria

Ownership or Legal Occupancy: You must be the legitimate owner of the property (residential or commercial), or an authorized occupant with legal rights to insure the structure.

Age Requirement: The applicant must be at least 18 years old.

Residency: The individual must be a resident of India.
Type of Property: The property must be a completed structure (not under construction or kutcha construction); plots of land and temporary structures are not eligible.
Society Coverage: For housing societies, an authorized member of the managing committee can purchase insurance on behalf of the society to cover common areas and utilities.
Companies: Both individuals and companies can purchase building insurance for eligible properties.
Documentation: Proof of ownership, residency, and identity documents are required.
Condition of Property: The property’s age, condition, and location may influence eligibility and premium rates.
Credit History: Insurers may consider the applicant’s credit history and previous claims record.

Features

Protection for the structure: Covers physical damage or loss to the building’s structure (walls, roof, floors, foundation, and permanent fixtures) due to insured perils such as fire, explosion, lightning, storms, floods, earthquakes, landslides, and other natural or accidental events.
Coverage for man-made risks: Provides protection against damage from riots, strikes, vandalism, theft, burglary, and malicious acts.

Coverage for contents (optional/add-on): Many policies offer coverage for general home contents like furniture, appliances, and electronics, often up to a certain percentage of the building’s insured value. High-value items (jewelry, antiques) may be covered through add-ons.
Accidental damage protection: Covers accidental damage to fixtures, sanitary fittings, and permanent installations.
Liability protection: Some policies include liability coverage for injuries or property damage to third parties occurring on the insured premises.
Reconstruction cost basis: The sum insured is typically based on the cost to rebuild the property, not its market value, ensuring adequate funds for restoration.
Add-ons and customization: Policyholders can enhance coverage with add-ons such as earthquake, flood, or terrorism cover, additional living expenses, rent loss, or coverage for external structures like garages and swimming pools.
Protection during emergencies: Some policies provide emergency funds for immediate needs if the property becomes uninhabitable due to a covered event.
Eligibility for both individuals and businesses: Available for homeowners, tenants, landlords, housing societies, and commercial property owners.
Coverage for attached structures: Includes garages, porches, decks, and other attached structures as part of the insured property.

Pros

Financial protection for repair or rebuilding after natural or man-made disasters.

Coverage for personal belongings like furniture, appliances, and valuables.
Liability protection for legal/medical expenses if someone is injured on your property.
Peace of mind knowing your investment is protected.
Affordable premiums relative to the coverage provided.
Customizable coverage with add-ons for specific risks (earthquake, terrorism, etc.).
Meets home loan requirements set by many lenders.

Cons

Exclusions and limitations (e.g., wear and tear, deliberate damage, war, unoccupied properties).
Claim rejections if policy conditions are not met.
Limited coverage for high-value items (jewelry, art may need extra riders).
No coverage for land value—only the structure is insured.
Premiums can increase based on risk factors or added coverage.
Not mandatory—many homeowners remain uninsured.

Terms and conditions

Coverage Scope: The policy typically covers damage or loss to the building structure from events like fire, flood, earthquake, theft, and other specified perils. Coverage may be extended to contents and valuables if specifically chosen.

Exclusions: Standard exclusions include willful or intentional damage by the insured, damage during third-party construction, wear and tear, damage from renovation or maintenance, cost of land, and buildings under construction.

Sum Insured: This is the maximum amount payable under the policy for any claim. It is usually based on the reconstruction cost of the building, not its market value.
Deductibles: The insured must pay a certain amount (deductible) out of pocket before the insurer pays the claim. Higher deductibles may lower your premium but increase your financial responsibility in case of a claim.
Premium Payment: Premiums are determined by factors such as the value of the property, location, coverage chosen, and policy duration. For long-term policies, the entire premium is collected in advance, and discounts may apply for longer durations.
Policy Validity and Voidance: The policy is voidable if there is misrepresentation, mis-description, or non-disclosure of material facts by the insured.
Claims Process: The insured must promptly notify the insurer of any loss or damage, provide required documentation, and cooperate with the claim’s investigation. Claims may be subject to deductions and conditions outlined in the policy.
Eligibility: The policyholder must be at least 18 years old and either the owner or legal occupant of the property. Both homeowners and tenants (for contents coverage) are eligible.
No Mid-term Inclusion of Perils: For long-term policies, additional perils cannot be added mid-term; coverage must be selected at inception.
Reduction of Sum Insured: After a claim, the sum insured is reduced by the amount paid out unless reinstated by paying an additional premium.
Policy Ceases After Major Structural Damage: All insurance under the policy ceases seven days after a building or part of it falls or is displaced, unless caused by an insured peril. The insurer may agree to continue coverage at revised terms if notified within seven days.
Land and Under-Construction Properties Not Covered: The cost of land and properties under construction are not covered unless specifically included.
Legal Compliance: Building insurance is not legally mandatory in India, but may be required by lenders for home loans.

Scenarios where building insurance
might get rejected

Non-disclosure or misrepresentation: Failing to disclose relevant information (such as pre-existing damages, renovations, or material facts) or providing false/incomplete details can lead to claim rejection.

Policy exclusions: Claims for damages or losses that fall outside the scope of the policy, such as those caused by intentional acts, wear and tear, or events specifically excluded in the policy, will be denied.

Negligence: Not taking reasonable care to prevent damage (e.g., leaving taps running, not securing the property, ignoring fire safety measures) may result in rejection.
Delay in filing: Not reporting the incident or filing the claim within the stipulated time frame set by the insurer can cause denial.
Insufficient documentation: Failing to provide adequate proof or supporting documents for the claim can lead to rejection.
Damage below deductible: If the cost of damage is less than the policy’s deductible, the claim will not be paid.
Non-payment or lapsed policy: If the insurance premium is not paid on time and the policy lapses, any claim made during that period will be rejected.
Fraud or exaggeration: Submitting fraudulent claims or inflating the extent of damage can not only lead to rejection but also legal consequences.
Inadequate coverage: If the claimed event or property is not covered under the policy, such as specific types of fire or construction defects, the claim will be denied.
Unoccupied property: Claims may be rejected if the property was unoccupied for a period longer than allowed by the policy at the time of loss.
Incorrect or incomplete application: Errors or omissions in the initial policy application can be grounds for denial.

How to avoid such scenarios

Read the policy thoroughly: Understand all terms, exclusions, coverage limits, and claim procedures before purchasing. Ask for clarification on unclear points and keep written records of all communications with your insurer.

Disclose all relevant information: Provide complete and accurate details about your property, its condition, prior damages, renovations, and any other material facts during application. Keep copies of all disclosures and confirmations.

Pay premiums on time: Ensure your policy is always active by paying premiums within the due dates. Lapsed policies will not honor claims.
Maintain proper documentation: Keep all policy documents, premium receipts, correspondence, and records of disclosures in an organized file (physical or digital).
Regularly review your policy: Annually check your coverage to ensure it remains suitable for your property and any changes (like renovations or additions) are promptly communicated to the insurer.
Notify insurer promptly: Report any damage or loss immediately, following the claim notification procedures specified in your policy. Delays can lead to claim denial.
Submit complete and accurate claim documents: Provide all required forms, photographs, invoices, police reports (if applicable), and any other supporting evidence as requested by the insurer.
Act responsibly and prevent negligence: Take reasonable care to secure your property and prevent avoidable losses (e.g., lock doors, maintain fire safety, fix leaks).
Do not exaggerate or falsify claims: Always submit honest and accurate information. Fraudulent or inflated claims can lead to outright rejection and possible legal action.
Follow up in writing: Communicate major matters in writing (email or registered post) and keep records of all claim-related interactions.
Seek clarification on rejections: If a claim is denied, request a detailed written explanation citing policy clauses. Review your policy and, if needed, seek professional help or escalate to the Insurance Ombudsman or consumer forums.