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As we bid goodbye to 2011, the year that witnessed natural calamities spread across many countries in different forms and scales, we must also ensure that we are adequately insured against such incidents. From floods, earthquakes to tsunamis, we saw it all. There is no compensation for the lives lost, but, one can protect monetary interest by buying insurance. While insurance for health and car are commonly known, here we will discuss the lesser-known insurance products that can help you hedge risks against uncertain events in the future.
Home insurance:
Home cover is one such product. It is very popular in developed countries and commonly known as homeowner’s insurance. Home insurance covers any damage to a home or any personal belongings in it. The concept of home insurance is not very popular in India due to lack of awareness. Estimates suggest that only about 1 per cent of houses are insured in the country, leaving the rest vulnerable to physical and financial losses.
Home insurance can be broadly placed into two categories: Insurance for the building structure and insurance for the household belongings. The natural calamities covered by home insurance include fire, lightning, earthquake, storm, cyclone, typhoon, tempest, hurricane, tornado, flood and landslide, including rockslide and bushfire.
In addition to these, home insurance products also cover burglary and theft of household items, liability towards any person because of the property or property owners, breakdown of domestic appliances, personal accident and protection for new household items for a limited period of time.
Need to know:
In order to get a better price advantage, policyholders should make a comparative analysis of the premium quotes from two or three companies. However, one should not consider only the price but also check the coverage and exclusions.
Home insurance cover does not depend on market value of the property and the sum insured is fixed on basis of reconstruction cost of the building. “Insurers pay reconstruction cost of the house because the land to construct the house is present anyways. Therefore, the value of the house from an insurance perspective is always the reconstruction cost multiplied by the square-foot area of the house and not the market value of the house,” said Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance.
For instance, for a 1,000-sq-ft area, which costs Rs 70 lakh, if a house is constructed for Rs 50 lakh, the policy should be taken for Rs 50 lakh only and not Rs 1.20 crore. “In order to arrive at the accurate sum insured as per the construction value, a government-approved valuer’s report is very useful so that no disputes are raised at the time of claim. However, the construction rates range between Rs 800 to Rs 2,500 per square foot depending on the quality of construction,” said Suresh Sethi, chief executive officer of Ria Insurance Brokers.
Exclusions:
Home insurance does not cover any amount of cash kept at home. The policyholder must provide a valuation report of jewellery valued by a government- authorised valuer for proper insurance. “In case, the policyholder failed to provide an authorised valuer’s report at the time of insuring his home, the insurer pay only around Rs 15,000 per jewellery at the time of claim after the insured provides the necessary proof of ownership,” Sethi added.
Protecting value:
Another emerging trend is that of residential welfare associations (RWA) or group housing societies insuring all member households. This reduces the cost of insurance for members and at the same time, they could avoid the hassle of going through the process themselves. “Residential societies or complexes can be insured under a single standard fire and special perils policy. However, the applicable premium is charged on basis of usage of particular structures, such as houses, shops or common utilities, like a clubhouse within the society or complex,” said TA Ramalingam, head, underwriting at Bajaj Allianz General Insurance.
While, it is always advisable to insure against any unforeseen event, you must remember to intimate the insurer as early as possible in case you wish to file a claim to avoid any problem with the final claim settlement. The policyholder may have to mandatorily intimate the insurer before leaving the house unoccupied for more than 30 days. According to reinsurer Swiss Re, natural and man-made catastrophes cost the world economy a record $350 billion this year. The reinsurer mentioned that 2011 will be the year with the highest catastrophe-related economic losses in history.
Shop insurance:
In India, the blasts in Zaveri Bazaar and fire at Manish Market in Mumbai have resulted in huge financial losses for small and large shopowners. In light of such unexpected risks, it becomes very important for shopowners to cover themselves adequately.
A shop insurance policy offers risk cover for financial losses from fire, earthquake, terrorism, flood and riots. “Various hazards covered under the shop policies are fire and allied perils, earthquake, terrorism, burglary, money in a safe and in transit, business interruption, fidelity (financial loss due to employee dishonesty) and public liability (third-party liability),” said Gaurav Garg, MD and CEO, Tata AIG General Insurance. It is always advisable for both home and shopowners to choose insurance cover from a well-known and financially stable insurance company or brand, which can be trusted over the long run.
“Sharing material information while seeking insurance, even if the questionnaire does not specifically ask for, is advised. For shopowners, precise nature of occupancy, such as nature of goods stored and type of storage like open storage, needs to be clearly spelt out in the proposal form,” said Karan Chopra, head of retail business at HDFC Ergo General Insurance.
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