Floods, fire or burglary: How home insurance helps

HOME INSURANCE FAQ

Representational image (Chennai floods 2015). Pic: Wikimedia Commons

So you won’t live for another 115 years, but your house may. Even the angry monsoon waters that have hit Indian cities real hard this year – from Bengaluru to Mumbai to Gurugram — might decide to break the record and roll in even faster and more furious next year.

While they don’t always make it to the headlines, many homes have got damaged due to the floods, and you certainly don’t want your home to feature in that list. So why don’t you plan to insure it?

Let’s begin. What is home insurance, anyway?

It isn’t about being sure that your home won’t get hit by natural calamities. That is one thing that no insurance policy has ever been known to prevent. Instead, it is about getting back the money that you lose in the unhappy event that your home gets damaged by calamities.

Which calamities are they?

Quite an impressive list, such as floods, storms, landslides or tornadoes. Lightning, fierce fire, excessive earthquakes, massive riots or strikes, cyclones, landslides, bursting or overflowing of water pipes and tanks, automatic sprinklers and car accidents can be included in the disaster list.

What does the fine print say?

Quite a number of situations are not part of the deal. Have you heard of temporary installations, or those that are still under construction? There is no coverage for kutcha constructions, for instance.

Other exclusions include war and terrorist activity.

Here are a few more that are not included in ‘home or building insurance’, unless you decide to go for ‘contents insurance’ as well to supplement the building coverage: Radioactive pollution, wear and tear of the house, damage in the residence-cum-shop, or residence-cum-office, loss of precious resources or related documents, paintings or antiques, loss of cash and cards, or damage to an unoccupied house.

Some other manmade calamities, such as theft, burglary, strike, riot and terrorism are also left out in case of home insurance that does not include contents.   

None of these disasters might strike you. So why go in for home insurance?

Sure, they may not hit you, but then again, they just may. Why do you want to be sorry rather than safe? If you are faced with a calamity, then you can rebuild your home quickly and move on in life, rather than sitting and mourning.

There are other benefits too. You face less stress of being felled, you can examine and estimate the cost and belongings of your house and you can sleep well.

Who can go in for home insurance?

You can, if you are an Indian citizen reading this. You have to be either an owner or an occupant of the house you want to insure.

Which company should you settle for?

The one that makes you pay least premium and involves less paperwork. Most companies give you the option of online insurance, so those are the least stressful.

What does it mean for your home to get attacked?

There are three aspects to it.

The physical structure is the first one.

Secondly, its content, or material assets are important.

Thirdly, the human assets, or the real people – and even the false ones – in your home are important.

So what kinds of insurance can help to insure you against the attack on your home?

There are two kinds, the first being home or building insurance, which insures only your physical building.

The second is contents insurance, which insures your assets and materials.

Even if you go in for a combination of ‘home and contents’ insurance, it can reimburse only the first two kinds of attacks. But for the third kind of attack, on the people, you have to look elsewhere.

Can an entire building or colony get included in this policy?

Nope, that is out. An entire building does not get included under home insurance.

Can you go for home insurance if you live in a rented house?

Sure, you can take it, but not for the house. You can only go in for ‘contents insurance’ that would include items such as household appliances, furniture, fixtures and jewellery. The insurance gives you cover against fire, natural calamities and burglary.

What should your guards and safeguards be while buying your policy?

Read. Read again. And then read some more. Examine the coverage, exceptions, and exclusions in your plan.

Are you putting in your house as well as belongings, or insuring just the building?

What liability can you expect?

If there is an error in the documentation, or something that you missed out or added unwittingly, then can you rebuild or replace it?

Secondly, look at your possessions. Do you need to file a claim? Then show proof of your items and make a verification of their value. Some companies even ask the owners to video-tape the items in their homes for complete proof of everything.

Thirdly, ensure that you have updated the value of your policies. Include the assets that you would add to your house, ensure that the inflationary rate has been included. The cover you opt for should be practical and realistic.

When does the insurance cover start?

It starts from the time you pay your insurer. Why would it start before you pay him, anyway?

How long does home insurance last?

You could take on insurance for a year, two years, ten years or even more, right upto 30 years. Now that, you will agree, is a fairly long tenure, but the choice is yours.

Can you buy home insurance from two companies?

Yes, you can. And once you file a claim, the two companies will begin to give your payments on a proportionate basis.

How do you know how much you’re going to get back?

You don’t, actually. It’s the insurance company that tells you how much.

First, the structure gets you a sum of money. That sum that is assured for the structure and content is calculated separately in the following pattern:

Sum that you can claim for the structure

In most cases, the sum assured is based not on market value, but on reinstatement value, which is what you would pay to reconstruct your house. The value of the land on which the house is based is excluded. The sum assured equals built-up area multiplied by the cost of construction per square foot. So, presuming that the built-up area of your house is 1,500 sq. ft and the construction rate decided by the insurer is Rs 1,000 per sq. ft., the sum that you can claim for your home’s structure would be Rs 15,00,000.

Sum that you can claim for the content

This is one sum that is based on calculations from the actual cash value (ACV) of an asset or from the cost of replacement. That works out to Current Market Value – Depreciation.

Will debris removal be covered under insurance?

Yes, if your building is covered with debris from fallen buildings nearby, then you need to spend on removal and reconstruction. The insurance policy can meet your costs for that.

Can you lower your home insurance premium?

Yes, you bet there is a way out for everything – and that includes home insurance premium. If you agree to bear a part of repair during the time of the claim, you can hike the voluntary deductible. That helps to lower the premium.

Secondly, when you have contents insurance as well, leave out old items, such as a 25-year-old toaster – even if you love it and it’s working well. Pick and choose the items you need to cover.

Another way of getting a discount would be to install some safety equipment, such as car insurance. Homeowners can install safety equipment and pursue some safety measures. Even security guards, or fire alarm and fire-fighting equipment can get you discounts between 10-15%.

Your resident welfare associations can bail you out too. If the entire group gets into a bargain for discounts, with groups of customers ready for 15-50% bulk discounts, then the condition, age and location of your building can determine the actual discounts.

Do not go in for irrelevant or unnecessary insurance cover. If you decide to go in for extra coverage not originally covered in the policy, for example against terrorism or rents paid due to displacement, you will need to gear up for more expensive policies.

Can you increase the sum assured in your policy?

Yes. The sum assured value in your policy can be increased, if you pay up the premium for the enhanced sum that has been assured for the remaining period.

Can a rented house be covered under home insurance too?

Undoubtedly. If your house is used for only residential and not commercial purposes, you can insure it. However, it should be a strong, not a kutcha construction.

Even your compound wall can be insured. The same condition applies – it should be durable, not a kuchha wall.

Do you have to file an FIR in order to claim your insurance?

Not if the damage has been due to floods, earthquakes, storms, lightning, or damage due to harmful impact, when there is an accidental loss.

However, an FIR is compulsory in situations following riots, burglary, strike, malicious damage, terrorism or larceny.

What other rules should be followed and which documents are required to be submitted?

As soon as you face a disaster, it would be your gut feeling to contact your insurer. Still, in the unlikely case that you forget, please contact the company within the deadline, which might be within seven days, or maybe even 15 days. Some firms let you report through an email or SMS, but some don’t.

Apart from the copy of an FIR, submit the following:

  • Fire brigade document, in case of fire mishap
  • Medical Officer’s certificate related to death or disability
  • Police investigation report
  • Original invoice from suppliers for replacement
  • Invoice of various owned articles
  • Repair estimates
  • Court summons

What happens if you sell your house?

You can sell your house but not the insurance policy. Please make sure that the buyer gets to know of it – or he might be under the happy illusion that he is getting a bonus insurance policy with all the premium paid!

When you begin to sell the house, the insurance gets automatically cancelled. You get back the money from the insurer, but not the entire amount.

If your house is damaged due to fire or other accidents, can you go ahead with repairs and claim reimbursement for insurance later?

If your home is damaged, never undertake repair work without informing the insurance company, else your claim will not be accepted. You can do the following:

First call the customer support through the telephone or send a mail to the insurer.

The insurer will send a surveyor to visit your house and gauge the damage and repair work that has to be done. Do not begin to repair before that is done. Otherwise your claim form will be rejected.

After the repair work is over, the surveyor will visit your home again. Give in the claim form, fire brigade or other reports and bills to the surveyor, as well as the additional documents that have been requested.

How soon can you settle the home insurance claim?

While it’s difficult to put a definite time frame on this, it is usually pretty fast – provided you have already learnt and followed what you should do. If you fill up your claims form and submit the necessary documents, the company will visit and gauge and process your claims settlement within seven days of the submission of the form. Send a cancelled cheque to the insurer, so that your insurance amount can be transferred to you directly.

Does this story have a happy ending?

Not completely, as your home is not where your heart is now. Still, you do get some of it back, along with your expenses, so you can choose to be happy if you feel that there couldn’t have been a better ending to it all.

About Revathi Siva Kumar 2 Articles

Revathi Siva Kumar is a freelance writer based in Bengaluru.

1 Comment

  1. Almost all the information supplied may be of guidance, in general, to exclusively owned buildings / residential houses and personal belongings/house hold articles. For instance, insurance against fire, may include caused by say, gas cylinder in kitchen.

    But if it is a building complex jointly owned and resided in by several persons, the terms and conditions of insurance , for obvious reasons,would be quite different. In view thereof, it will serve the purpose and be of useful guidance if all such information as applicable to a building complex, in general, is likewise procured and shared with those concerned.

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