Home Insurance: Building vs Contents Cover Explained

Building cover pays to repair or rebuild the structure of your home, while contents cover pays for the movable things inside it, such as furniture, appliances, electronics and clothes. Owners usually need both; tenants need only contents cover. The biggest mistake is insuring a flat at its market price instead of its rebuilding cost, which wastes premium on land value that no fire or flood can destroy.

What each cover protects

Both covers typically protect against fire, lightning, explosion, storms, floods, cyclones, earthquakes, landslides, riots, malicious damage, terrorism (often optional), burst water tanks and pipes, and impact damage. Theft and burglary of contents is usually covered when it follows the listed perils or is added as a separate section.

Bharat Griha Raksha: the standard home policy

IRDAI introduced a standard home insurance product, Bharat Griha Raksha, which insurers began offering from 1 April 2021. Many insurers continue to sell it as of October 2026, alongside their own home plans. Its key features in the standard wording:

• Building insured on a reinstatement (rebuilding) value basis
• Contents covered automatically up to 20% of the building sum insured, capped at ₹10 lakh, without a list of items
• Higher contents cover available by declaring items
• No underinsurance penalty (no "average clause") on the building, provided the sum insured is set using the insurer's method
• Policy terms of up to 10 years
• Add-ons for valuables, loss of rent and alternative accommodation

Product wordings can change after IRDAI's 2024 product regulations gave insurers more freedom to design products, so confirm these features in the policy document you are offered.

How to set the building sum insured

Insure the cost to rebuild, not the price you would get on sale.

Rebuilding cost = built-up area × current construction cost per sq ft

Construction cost varies by city and finish. Use a figure from a local engineer, builder or the insurer's guide, and update it regularly because construction costs rise each year. Try projecting the rise with the inflation calculator.

For flats, check what the housing society already insures. Many societies insure the common building structure, and your policy may only need to cover your unit's interiors and contents. Ask the society for its policy copy.

Worked example: a 2BHK owner and a tenant

Owner: Sunil owns a 1,000 sq ft (built-up) flat in Pune. Market price: ₹95 lakh. Assume a rebuilding cost of ₹2,600 per sq ft (illustrative).

Insuring the building at ₹95 lakh would cost far more premium, but on a total loss he could still claim only what it costs to rebuild.

Underinsurance under a policy with an average clause: suppose Sunil instead bought an older-style fire policy with a building sum insured of ₹15 lakh, while the true rebuilding value is ₹26 lakh. A kitchen fire causes ₹4,00,000 of damage. With an average clause, the insurer pays in proportion:

₹4,00,000 × (₹15,00,000 ÷ ₹26,00,000) = ₹2,30,769

Sunil bears about ₹1.69 lakh himself. Under the Bharat Griha Raksha wording, with a correctly computed sum insured, the average clause does not apply to the building. (Illustrative; actual settlement depends on wording and survey.)

Tenant: Anita rents a flat in Bengaluru. The landlord is responsible for the building. Anita's furniture, appliances, laptop and clothes total ₹4,50,000. She needs a contents-only policy for ₹4,50,000, plus a separate declaration for her jewellery if she keeps any at home.

Contents cover: valuation and traps

• Replacement vs indemnity: some policies pay the cost of a new equivalent item; others deduct depreciation for age. Check which.
• High-value electronics: laptops and phones may have per-item limits or need a portable equipment add-on to be covered outside the home.
• Jewellery and valuables: usually covered only if declared with valuation; keep bills or certified valuation reports. Many families keep jewellery in a bank locker, where bank liability is limited, so check whether your policy extends to locker contents.
• Unoccupied home: some policies restrict cover if the home is left vacant for long periods, often 30 or 60 days or more.
• Burglary evidence: forcible entry and an FIR are typically required for theft claims.

Owners vs tenants vs landlords

Home loan lenders usually require the property to be insured, but you can buy the policy from any IRDAI-registered insurer; you do not have to accept the lender's bundled product. See the hidden costs of buying a flat for other costs to budget.

Reviewing cover every year

A home policy set up once and forgotten slowly becomes inadequate:

• Construction costs rise. Revise the building sum insured if your policy does not index it automatically.
• Renovations add value. A new modular kitchen, flooring or wardrobes increases rebuilding cost; see our home renovation budget guide.
• New purchases. A new TV, laptop or air conditioner may push contents above the automatic 20% cover.
• Life changes. Moving from owning to renting out the flat changes what you need (loss of rent, landlord contents).
• Inventory. Keep a simple list or video walkthrough of rooms and items with purchase bills stored online. It speeds up claims.

If you live in a flood- or cyclone-prone city, check whether natural catastrophe cover is included by default or must be added, and whether basement and ground-floor contents have special limits.

Premium, GST and tax as of October 2026

• Home insurance premiums carry 18% GST as of October 2026; the September 2025 exemption applied only to individual life and health insurance.
• Home insurance premiums for a self-occupied home are not tax-deductible. For a let-out property, rental income is taxed after the standard 30% deduction, which is meant to cover repairs and such costs, so insurance is not claimed separately.

Claims and complaints

Inform the insurer immediately, take photos before cleaning up, keep damaged items for the surveyor, and file an FIR for theft or riot damage. If the claim is rejected or under-settled, write to the insurer's Grievance Redressal Officer, then escalate via IRDAI's Bima Bharosa portal and the Insurance Ombudsman (for disputes up to ₹50 lakh). See insurance claim rejected reasons.

Key takeaways

• Building cover protects the structure and fittings; contents cover protects movable belongings.
• Insure the building at rebuilding cost, not market value; check your housing society's policy first.
• Bharat Griha Raksha covers contents automatically up to 20% of building cover, capped at ₹10 lakh; declare anything above.
• Tenants need only contents cover; jewellery and valuables usually need separate declaration.
• Home insurance carries 18% GST as of October 2026 and is not tax-deductible for a self-occupied home.