Home Insurance (21)
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 home insurance policy provides you with protection against the risk of loss for your structure as well as its contents. A home and its contents are among the biggest investments one usually makes; and therefore a loss of a home due to a calamity or its contents can cause a major financial setback in addition to the hardship of not having a home.
These days many homes and major purchases are bought through loans and mortgages. 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.
Many Insurers today require that suitable home insurance is taken for any home that is purchased with a home mortgage or against which a loan has been taken.
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
o Natural calamities, such as fire, lightning, earthquake, landslide, rockslide, flood, inundation, storm, tempest, typhoon, hurricane, tornado, or cyclone.
o 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.
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.
In case you are living as a tenant, you still run the risk of losing your belongings in the unfortunate event of a fire or theft. Also the lives of your family members may come under risk. Therefore it’s advisable to take an insurance policy which covers your belongings and your family.
As a tenant you can only insure the contents that belong to you. An insurance policy for the structure is available only to home owners.
I am a tenant and have insured the Contents of my home. What changes do I have to make in my policy if I change my residence?
Any burglary of insured items taking place outside the insured premises is not covered under the householders’ insurance plan unless specifically mentioned in the policy. Things such as valuables, jewellery, baggage etc. may be covered under some conditions/circumstances or the coverage may be taken as an add-on at a premium. Please review the terms and conditions of your home insurance policy carefully at the time of purchase.
Although there can be various inclusions depending on the kind of policy you go for but common exclusions include:
• Deliberate destruction of property
• Loss or damage caused by war, wear and tear, atmospheric conditions etc.
• Losses if home has been unoccupied for more than 30 days (but few insurer do provide cover)
• Loss of cash, bullion, painting, works of art, and antiques
• Loss to the structure and/or contents of home due to acts of terrorism. (can be covered as an add-on)
If the new owner of the house wants to continue the householders’ insurance cover, the insurance company issues an endorsement in the insured’s name and passes the policy on to the name of the new owner. Else, you can cancel the insurance and can get a refund. The refund amount is mostly calculated as per the Short Premium Rates, applicable to policies with terms shorter than a year.
No, the age of your house has no impact on the premium of your householders’ insurance policy. However, beyond a particular age, some companies may refuse to insure your house. This time period often varies from company to company; a few companies refuse to insure houses that are more than 50 years old while other may have this limit at 25 years.
Home insurance policy, as you might be aware, needs to be renewed each year. Therefore it’s your responsibly to adjust the amount of cover taking into consideration the inflation, the improvements/changes you make in your house. Also, most insurance companies have a maximum limit to the per sq feet price they are willing to cover so you can’t increase the sum insured beyond a limit which varies from insurer to insurer.
However, insurance companies do offer a cover against inflationary factors as an Additional risk cover, which might come at a proportionate hike in the premium. Therefore you must go through the insurance document carefully.
I have got another house that is presently not in use, can it be insured and if yes, what type of cover should I go for?
The property can be insured even if it’s not in use presently. One can go for one of the two options depending on his/her requirements-
If the home is furnished, you can opt for a policy that covers both your house and its contents.
But, if the house is not furnished, you can opt for a Standard Fire and Special Perils policy only for the building. This policy will protect the structure of your building against loss due to fire / earthquakes etc. however, there are only few companies that provide this cover.
No, a home insurance premium doesn’t enjoy tax benefits under the current income tax regulations. However, proceeds from a policy claim are exempted from tax. However, the lack of any tax incentives for buying home insurance should not be a deterrent as the advantages associated with a home insurance plan far exceed any tax related benefits.
The process of filing a claim is not very difficult if you follow these simple steps-
• In case of burglary, inform the police immediately along with a list of items stolen and their approximate value.
• Inform the insurance company about the occurrence as soon as possible.
• Once you inform the insurance company, a surveyor will be sent to your house for an on-site inspection. Your cooperation would only make this process easy and less time consuming. Provide the necessary documents to substantiate your losses.
• You now need to submit a claim form at the insurance company.
The surveyor submits a report to the company after it is processed and approved; you receive your claim amount.
You need to submit a ‘claims form’, duly filled and signed, along with a letter declaring your ownership on the contents and belongings.
Some other documents are also required which are considered as evidence of the event happening, the nature of the event and the extent of loss:
• First Information Report (FIR) from the police in case of burglary
• Fire brigade report in case of fire
• Seismological report in case of earthquake
• Meteorological department’s report in case of flood
• Estimate of the repairs
• Rent agreement
• Transport details in case of baggage loss
You could lodge a complaint that you may have against any insurer relating to:
i. any partial or total repudiation (rejection) of claims by the insurance companies,
ii. any dispute with regard to premium paid or payable in terms of the policy,
iii. any dispute on the legal construction of the policy wordings in case such dispute relates to claims;
iv. any delay in settlement of claims and
v. non-issuance of any insurance document to customers after receipt of premium.
The contract of insurance is for an amount not exceeding Rs. 20 lacs.
You need to lodge your complaint in writing addressed to the Insurance Ombudsman of the region under which the office of the insurance company falls. For a list of Insurance Ombudsman in India and their contact details including telephone numbers and email Ids please see the attached link. (http://www.irdaindia.org/ombudsmen/ombudsmenlist_new.htm)
You may lodge a complaint with the Ombudsman if:
- You have already lodged a complaint with the concerned Insurance Company and it has either rejected your complaint or you have received no reply on your complaint within one month of your complaint or even if you are not satisfied with the response or action taken by the insurance company in respect of your complaint
- Your complaint to the Ombudsman is not more than one year later after the reply of the Insurance company
- Your complaint is not pending with any court, consumer forum or arbitrator.
The award of the Ombudsman is binding on the insurance companies but not on the complainant who can choose to approach other bodies such as Consumer forums or Courts of Law.
A detailed note on the functioning of the Insurance Ombudsmen in India is available on the Insurance Regulatory and Development Authority of India (IRDA) website. (http://www.irdaindia.org/brief12aug2003.htm)