Protect your Home against Nature’s fury

Natural disasters and calamities strike at will and in most cases are without adequate notice or advance warnings. Even when there is an advance warning, there is not much that one can do to avoid the inevitable devastation and destruction of one’s assets. Whether it is earthquakes, floods or tsunamis, the frequency and extent of damage on account of some of these unfortunate events has been taking affecting a large chunk of the human population across the world. Southeast Asia and in particular India has a fairly wide range of geographical and climatic conditions and features that make it fairly vulnerable.  The extent of our preparedness to combat these events is also somewhat limited on account of still being a developing economy with a large population and not enough available resources.

Estimations of National Disaster Management Authority reveal that about 60% of the Indian land is prone to earthquakes while 8% of the land is susceptible to cyclones with more than 60 million of our population living low coastal zones. Where does that leave us as individuals who wish to protect themselves against the risk of losing our Home and its contents and having to rebuild their lives all over again?

What is Home or Householder Insurance?

Home Insurance plans provide you with an insurance cover for both the structure of your house and its contents against fire and allied perils on account of:

  • Natural calamities – such as fire, lightning, earthquake, landslide, rockslide, flood, inundation, storm, tempest, typhoon, hurricane, tornado, or cyclone
  • Man-made calamities – such as domestic gas explosions, overflow and bursting of water tank or pipes, damage caused by aircrafts, riots, strikes, malicious or terrorist acts 

Additionally, the contents of your house can also be insured against burglary and theft and in some cases mechanical failure or breakdown.

A few other risks can be covered as part of your home insurance depending on the availability of such features in the product you purchase and at an extra cost or premium. These risks could include:

  • Terrorism cover
  • Debris removal cost
  • Costs incurred to comply with building regulations following damage
  • Professional fees towards architects, surveyors, etc. for superintending a building during rebuilding
  • Cost related to movement of contents of your home to a temporary residence
  • Loss of rent (for landlord)
  • Personal Accident Cover 

If you are the owner of your house, you could purchase a home insurance policy to cover both the structure of the building as well as its contents. On the other hand, if you do not own the house you live in, you could still insure the contents and your belongings against risks of fire and allied peril, theft and mechanical breakdown as applicable and available.

A loss of home and its contents can cause additional burden if in addition to replacing the contents, one has to repay the loans outstanding as well. Insuring your home and its contents provides you with the certainty that your home can be replaced and your family protected.

What are the various home insurance covers that are provided by insurance companies?

A home insurance policy is a very extensive product since it covers the house, its contents, its inhabitants and also their third party liability. The covers available can be divided under various sections or categories.

  1. Fire & allied Perils – protects you against fire and its associated perils that might happen due to
    • Natural calamities, such as fire, lightning, earthquake, landslide, rockslide, flood, inundation, storm, tempest, typhoon, hurricane, tornado, or cyclone.
    • Man-made calamities, such as domestic gas explosions, overflow and bursting of water tank or pipes, damage caused by aircrafts, riots, strikes, malicious or terrorist acts.
  2. Burglary & housebreaking – provides for damage to your house and the financial loss you suffered due to burglary. You can also get cover against damage caused by falling trees, electric poles or lampposts, collapsing aerials or satellite dishes, as well as damage caused by civic authorities while fighting fire.
  3. Jewellery & valuables – cover against accident or misfortune anywhere in India for valuable items, such as jewelry, gold, silver, and other precious metal items, watches, clocks, photographic equipment, video cameras, telescopes, microscopes, music instruments, and sports equipment.
  4. Plate glass – provides cover for breakage of fixed glass and sanitary fittings, including cost of frame, lettering, painting etc.
  5. Breakdown of domestic appliances – Provides cover for damage to domestic appliances, such as refrigerators, washing machines, air-conditioners that might occur due to accidental electrical or mechanical breakdown.
  6. Breakdown of electronic equipment – Provides cover for loss or damage to electronic equipment by accident or misfortune.
  7. Pedal cycle – provides cover for loss or damage to your pedal cycle against accident (including fire and its allied perils), burglary, and third party legal liability for accidental injury, death, or property damage.
  8. Baggage – provides cover for loss or damage to baggage belonging to you and your family due to accidents while travelling anywhere in India/world. However, it excludes money securities, gold and silver ornaments, travel tickets, cheques, share certificates, and consumable goods.
  9. Personal Accident – protects you and your family members against accidents and violence, leading to bodily injury, disablement (permanent or temporary), or death. Some companies also provide for the educational expenses for a maximum of two dependent children
  10. Public Liability Risk and Workmen’s Compensation Risk – Protects against liability to the general public and your employee for accidental death, bodily injury, or property damage.
  11. Increased Living Expenses – covers expenses incurred due to damage to your home by fire and its allied perils, making it inhabitable.

Most of the insurance companies make it mandatory for one to purchase at least two to five sections of the householders’ insurance policy – along with the Fire and Allied Perils section being compulsory.

How is the value of my house assessed by the insurance company?

The value of your house is assessed as per its ‘reinstatement value’ i.e. what it would cost to rebuild (reinstate) your house. This is calculated as the area of your house multiplied by the rate of construction per square feet, as on the date of purchasing the policy. E.g. if you have a 1,000 sq. ft. house, and the present construction rate per sq. ft. is Rs. 900/-, your house is valued at Rs. 9,00,000. Different insurance companies have different limits for construction rates in a given city and insurance cover would be provided up to a maximum of such limits.

How does an insurance company assess the value of the contents of my house?

Contents are assessed on the ‘market value’ of the items. This means that if there were a loss, the claim would be paid on the value of purchasing a similar new item, less depreciation for the usage.

Most insurance companies don’t require a survey to assess the value of either your house or your belongings. They insure you in ‘good-faith’. However, at the time of claim you will need to substantiate ownership with applicable and appropriate proofs.

While the devastation and loss associated with a natural calamity can never really be totally compensated for, having an adequate and appropriate cover for your home and/or its contents can somewhat mitigate the financial hardships associated with such event and its aftermath.

© 2011