It is very important to have a roof over the head. Having your own house automatically reduces many problems. Along with this, the care and maintenance of one’s own house is also in one’s own hands. At the same time, to protect your home from any kind of natural calamity, home insurance is also very important.

                                                                                                                                    Subas Tiwari

Due to natural calamities like flood and earthquake, there is a lot of loss of life and property. The worst thing is that these disasters never come without warning and when they do come, the scene of destruction is also horrifying. Many times due to natural calamities like floods, earthquakes, houses and even the biggest buildings have been seen to be destroyed. In such a situation, it is necessary to take home insurance to avoid any untoward incident and loss.

Why it is necessary?

What do you understand when you are told to take a household package insurance policy? A layman like you could only guess- it is for households where insurance cover is available on the happening of an unfortunate event. If it is not enough & the policy coverage is wider than this understanding, does that mean that the wider scope needs to be fully understood? YES, that’s why we are offering here a deep insight into this whole gamut of household insurance to understand the concept & applicability in real-life situations for the average consumer.

Read this article fully to get some knowledge awareness & education so that when the need arises (events come without advance notice), you are not left high & dry and that you are fully competent to deal with the situation for your benefit. If you have already bought a policy, you can assess whether you have the best policy on hand.

What it means for household effects?

Coverage for household effects means insurance cover against accidents due to fire due to short-circuits, or theft of household goods, theft of jewellery, household appliances, etc. There are 3 insurable components in a home insurance – the structure (building), the contents (material assets) and people (family members and third party). You can get a specific coverage either for the structure or the contents of your home. You can also opt for a comprehensive coverage that includes both the structure and the contents. Home Insurance provides coverage for the loss or damage to your personal property and possessions against natural and man-made calamities as under. IRDA calls this type of insurance as ‘Property Insurance’.

(i)Natural- Fire, Storm, Earthquake (see BOX), Tornado, Cyclone, Flood, Landslide, Lightning, etc.

(ii)Man-Made -Fire, Burglary, Theft, Aircraft Damage, Malicious Damage, Terrorism, Strike, Riot, Explosion, etc.

Perils Covered

Allied (special) perils covered under a Fire Policy

Insurance against fire is invariably linked to perils associated with it such as fire damaging fixed glass, breakdown of domestic appliances (TV,VCP/VCR/DVD, PC, Laptop) pedal cycle, baggage, payment of professional fees paid for reconstruction after damage, rent paid on relocation due to damaged house, loss of documents (Passport, Driving License). It also includes damages caused by fire, lightening, explosion/implosion, aircraft damage, riot, strike, malicious & terrorism damage, storm, cyclone, typhoon, tempest, hurricane, tornado, flood & inundation, impact damage, subsidence and  landslide including rock-slide, bursting and/or overflowing of water tanks, apparatus & pipes, missile testing operations, leakage from Automatic Sprinkler Installations, Bush fire & Earthquake (fire & shock). So, if you take a household policy with fire cover, you are automatically covered for all these perils.

Benefits covered in a Burglary Policy

Burglary or theft to home, robbery/dacoity of the contents of the home, contents that has been placed in safe custody during temporary absence from home, contents that have been removed to private accommodation (other than one’s home) that is being occupied by insured/his family for the period of insurance, impact damage by falling trees/electric poles/lamp-posts, breakage or collapse of television or radio aerial/satellite dishes & damage by civic authorities in prevention of fire. When you buy a burglary policy, you are protected against burglary, housebreaking, theft & larceny, damage to your house or safe due to burglary/housebreaking.

Can articles in bank lockers be covered?

No. This household policy only covers material assets which are housed where you stay. So, locker contents in a bank cannot be covered. However, there are insurance companies which offer a separate policy insuring such locker contents in a bank. 

Can it cover Home Loan amount?

Except one private insurer, the insurance cover on a home loan amount taken for the construction/outright buy of a flat/apartment is not available under this policy. However, banks have been offered a tailor-made policy insurance cover for death/disability due to personal accident of the borrower covering the outstanding amount of the home loan by the insurance companies which have a tie-up. This cover helps the legal heirs in not getting the burden of the home loan repayment, as the insurance company directly remits the claim to the loan account of the deceased borrower.

What are the Exclusions?

(1) Exclusions in the structure – Property under construction, residential property used for official/business purposes and kachcha construction (Third Class).

(2) Exclusions in the contents – Books, manuscripts, money (some do not cover them), bonds, shares, securities, consumables, vehicles, etc.

(3) Willful destruction of property,

(4) Loss, damage, or destruction caused by negligence, wear and tear, civil war and nuclear weapons, etc.

(5) Terrorism (some of the insurance companies load extra premium for covering this insurance risk).

Under what circumstances, extra premium becomes payable? 

Customers can opt for plans in which the sum assured is increased by a certain percentage every year. A few insurers offer this plan, with a nominal add-on premium. Otherwise, based on risk-assessment of a structure, material assets, etc., insurance companies load additional premium. Extra premium also becomes payable if you include domestic servants on permanent employment (maids, drivers, etc.) which are called “Legal Liability towards servants/third party”.

What are the inclusions without extra premium payment?

Expensive belongings, electronic goods such as laptops, televisions, etc., precious goods like gemstones, jewellery, etc., appliances such as washing machine, refrigerator, kitchen appliances, furniture and furnishing items, personal accidents, etc. But insurance cover inclusions vary from company to company & cannot be standardized.

Period of the Insurance Policy

Generally, the term of home insurance is one year & renewable thereafter, but a few insurers offer plans up to a term of 3 years.

Advantages of a Home Insurance Policy

• Since almost all insurance companies are offering online policies, it becomes easier to buy a policy from the comforts of your home.
• Complete peace of mind regarding your property /investments.
• When you are away on holiday/tour/going abroad for a longer stay, you can go without thinking about your home & its safety.
• For a nominal premium (approx. Rs.0.50 paisa per Rs.1000), it is the cheapest of the premiums in an insurance policy.
• Some of the insurers are offering discount on premium (even up to 50%) if one takes a long-term policy.
• All unintentional damage to structures/assets is adequately compensated with repairs/ reimbursement of rent paid on lease (up to one year), transportation costs involved, therebyminimizing the hassles and documentation.

Limitations

• Perils covered are not uniform thereby the consumer is not able to take an informed decision quickly while comparing the home insurance product on offer.
• Sum insured & premium cannot be clearly defined as it is based on risk-assessment of building (value, age & class of construction), material assets and additional insurance covers.
• Individual ceiling on compensation on each item damaged thwarts full compensation of costly items.
• Structural damage due to earthquake (fire & shock) are covered in some of the policies but seldom settled in a home insurance claim.

Complicated Issues & Solution

(1) Why should anyone insure a building? Fire cannot possibly do any harm to the building.

Fire and other perils (normally covered under a fire insurance policy) can cause loss/damage to buildings. There have been fire accidents that have completely destroyed multi-storied buildings. Floods can also bring about devastating losses. Similarly, riots and acts of terrorism can also produce huge losses to human lives as well as property.

(2) One has taken an insurance policy covering his building. The bank which has financed his business has also taken insurance separately. Both policies are in force covering same property. How then is a claim settled?

In the event of a claim, each insurer will pay the loss amount in proportion to the Sum Insured under their respective policies, in accordance with the principle of contribution. The object of the principle of indemnity is to place the insured in the same place as he occupied prior to occurrence. Insured is prevented from making claim for full amount of loss under each policy. Insurance company indemnifies the insured only to the extent of actual loss suffered subject to depreciation, policy excess etc., and not permit to make profit out of a loss.

(3) One wants to cover his household goods against burglary when he is away. Can he get a burglary insurance policy?

A burglary insurance policy covers goods against the risk of burglary. A burglary insurance policy may also offer extension of cover against theft. A burglary insurance policy will usually cease to operate if the house is not occupied beyond a certain defined period unless you have intimated the insurance company and they specifically agree to extend the cover even when the house is not occupied. It is a good idea to ensure that you have a burglary policy always rather than opting for one only when you are away. You might not get one if you want to ensure to insure the contents only when the house is locked.

(4) One needs to cover his jewellery. What policy should he take?

Insurers offer ‘All Risks’ policy for covering jewellery. You must ensure that your jewellery is valued correctly and you are able to show proof of valuation should a claim occur. An All Risks policy also has exclusions, so go through the terms and conditions thoroughly.

Conclusion-Obligations of the insured

Every insured is expected to behave as though he is uninsured. It is better to take all precautions to prevent / aggravate the loss. After lodging an FIR with your area Police Station, please inform Insurance Company also who have to be given an opportunity to inspect the damages. You have to first call the Fire Brigade also who will assist you to put out the fire. During firefighting, any damage caused to other insured property caused by water, will be paid by the Insurance Company. It is beneficial to extend cooperation to surveyor while inspecting and assessing the loss. If arrival of surveyor is likely to be delayed, then, you can take photos / and shift unaffected assets to a place of safety. Please give completed claim form and documents as required by Insurer, in support of your claim. After repairs / replacement, you have to submit bills to the Insurer.