Why your smart home needs both cyber and home insurance for complete protection

Cyber insurance helps you deal with risks like hacking, identity theft, and online fraud, while home insurance secures you against physical damages to assets like fire, short circuits, or electrical breakdown.

As our homes get smarter, they also become more vulnerable — not just to physical damage but to cyber threats too. From hacked security cameras to short-circuited smart fridges, protecting your connected home now means having both cyber and home insurance in place. Today's Ask Wallet Wise query decodes insurance that covers damages caused by tech malfunctions or short circuits.

Moneycontrol's Ask Wallet Wise initiative offers expert advice on matters of personal finance and money. You can email your queries to askwalletwise@nw18.com, and we will try and get a top financial expert to address your queries.

I use a lot of smart home devices. Is there any insurance that covers damages caused by tech malfunctions or short circuits?

Expert’s view: With the rise of smart homes, many of us now rely on connected devices such as security cameras, appliances, voice assistants, smart locks, and energy management systems. These devices bring convenience, but they also introduce two distinct types of risks: physical risks such as short circuits or device malfunctions, and cyber risks such as hacking, data theft, or unauthorized access through these devices. Your concern is therefore highly relevant, and I am happy to share that insurance products do exist to provide coverage across these risk areas.

When it comes to cyber insurance, policies for individuals and families are increasingly designed to cover the risks arising from connected technologies and smart devices. For instance, if your smart home network is compromised, hackers can gain access to the devices/appliances connected to that smart home network and cause damage to them or contaminate them.

To cover such risks, many cyber policies offer Smart Home cover which pays for the cost of hiring an IT consultant to decontaminate the affected connected appliances/devices and restore them to the closest possible condition in which they were immediately before the Cyber Incident.

However, there is an important distinction to keep in mind. Physical malfunctions such as an electrical short circuit or internal breakdown of a smart appliance would not fall under the scope of a cyber insurance policy. These are typically covered under home insurance policies, often through add-on options like electrical and mechanical breakdown cover. For example, if a short circuit damages your smart refrigerator or causes fire damage in your home, that would be managed under a home insurance plan, not cyber insurance.

What this really means is that to fully protect a smart home, families should consider a combination of both covers. Cyber insurance helps you deal with risks like hacking, identity theft, and online fraud, while home insurance secures you against physical damages to assets like fire, short circuits, or electrical breakdown. Together, they provide comprehensive protection for both the digital and physical dimensions of smart living.

Before finalising a policy, it is advisable to carefully review the terms, coverage limits, and exclusions. Check whether family-wide cyber coverage is available, since connected devices are often used by multiple household members, and review whether breakdown add-ons in home insurance adequately cover high-value gadgets. In a world where our homes are increasingly digital, combining cyber and home insurance ensures peace of mind and a safety net against both technical malfunctions and sophisticated cyber threats.