Your house insurance policy insures the structure of the home based on its reinstatement value, which is nothing but its reconstruction value (not for market value).
Use the following pointers to calculate the Sum Insured of your house:
• Multiply the ‘built-up area’ of your home with the current construction cost per square foot.
• Exclude the cost of the land from the calculation of the SI.
• Include the construction of any compound wall for the home.
Example:
If the built up area of your home is 1400 sq. feet and the the construction rate is Rs. 1000 per sq. feet, then your SI Rs. 1,400, 000/-
If you are living in a row house or bungalow, which has lawn / garden surrounded by a perimeter wall, the construction rate can be revised to include the cost of construction of this wall in home structure sum insured.
However, the maximum sum insured as construction value of building that you can opt for your home is 25 Lakhs.