5 Home Insurance Mistakes That Could Cost You Lakhs

Current position — reviewed 22 August 2026

The five mistakes below remain the common reasons home-insurance claims fail, and the guidance is unchanged as at this review.

• Review the sum insured after any renovation or change of use — under-insurance still leads to proportionate claim reduction.

• Flood, earthquake and similar perils are covered only if the policy or add-on specifically includes them.

• Individual life and health insurance premiums are GST-exempt from 22 September 2025; home/property insurance premiums continue to attract GST at the standard rate.

Imagine this: A family in Hyderabad returns home after a weekend trip, only to find their living room flooded because of heavy rains. They had a home insurance policy, but when they tried to claim the damages, they discovered that the policy didn’t cover floods. The repair costs ran into lakhs of rupees, leaving them stressed and financially strained.

This is not an isolated case. Every year, floods, fires, and other unexpected events damage homes across India. Many people think buying home insurance is enough—but the truth is, even with a policy in place, certain mistakes can make it almost useless when you need it the most.

Here are the five most common mistakes people make with home insurance and how to avoid them:

1. Letting Policies Lapse or Not Updating After Renovations

Many homeowners buy insurance once, often while applying for a home loan, and then forget about it. For example, if you add a modular kitchen or convert a room into a home office but don’t update your policy, the insurer may not cover the added value. Always check your policy regularly and update it after renovations to ensure full coverage.

2. Ignoring Claim Settlement Records and Processes

A cheap policy may look appealing, but if the insurer takes months to settle claims or has a poor track record, it won’t help during emergencies. For instance, a family whose house caught fire struggled for weeks because their insurer delayed processing. Always check the claim settlement ratio and customer reviews before choosing a policy.

3. Overlooking Coverage for Rented Homes or Living Expenses

If you live in a rented home or rent out your property, many policies may not cover temporary accommodation or rent loss. For example, a tenant whose apartment became uninhabitable after a flood had to pay for a hotel out of pocket because their insurance didn’t include “additional living expenses.” Make sure your policy explicitly covers these situations.

4. Focusing Only on the Structure, Ignoring Contents

Home insurance isn’t just about walls and roofs; it also protects what’s inside. Electronics, furniture, jewelry, and art often have limited coverage in basic policies. For example, when a fire destroyed a family’s home, their expensive electronics were only partially reimbursed because they weren’t declared properly. Estimate the value of your belongings and include them in the policy.

5. Choosing the Cheapest Policy Without Assessing Coverage

Low-cost policies often come with exclusions, high deductibles, or limited coverage. A family that opted for the cheapest policy after a burglary found that their insurance didn’t cover all stolen items. Choosing a slightly higher premium for a reliable insurer and comprehensive coverage can save you from major losses.

Home insurance is more than a document; it’s protection for your home and your peace of mind. By avoiding these common mistakes and making informed choices, you can ensure that your policy actually works when you need it most.