To protect your home, choose the right policy

Sanjay Datta

A home is often an once-in-a-lifetime investment, emotionally and financially. Creating an abode, however, does not end with the purchase. An insurance to protect this asset is just as important.

But as per ICICI Lombard 2016 survey, only 7 per cent Indians have home insurance.

India has a risk rating index of 6.64 as per the World Risk Report 2016, which measures the susceptibility of nations to natural disasters and consequently, economic stability. The rating is higher than China and other emerging nations such as Brazil, Russia, and South Africa, under the BRICS cluster. These alarming numbers in light of the recent natural disasters emphasise the need for a comprehensive home insurance cover.

Factors such as geographic location, climate, built-up area, market value, among others, determine the type of home insurance coverage to be chosen. Broadly, there are two basic types of home insurance plans available – content and structural.

Homeowners can add extensions to their base policy and enhance the coverage of these plans. One such extension is against earthquake perils and it is recommended for residential properties in locations with high seismic activity.

Burglary and theft are the alternatives if not already included in the base policy, and are particularly useful for city dwellers who want to protect their valuables and devices from a break-in. It is to be kept in mind that burglary will be covered only under circumstances where the insured has taken reasonable care to keep their valuables safe.

Under the base policy, structural or building insurance complements the content and provides a cover for losses against structural damages. It only protects the structure and not the contents. Hence, when purchased with a content cover, the structural policy lends a comprehensive coverage to your home. Losses due to natural calamities such as fire, lightning, aircraft damage, storm, cyclone, flood and inundation are covered under the policy. Wilful destruction and losses due to wear and tear etc. are excluded.

Content insurance, as the name suggests, protects the contents inside your home. It includes furniture, durables, clothes, utensils, devices, etc. In case any of these items are destroyed due to an untoward natural or manmade disaster, as defined under the policy, the insured can make a claim to get a reimbursement up to the amount specified. The amount received by the insured is the market value of

those items on the present day minus depreciation.

The sum insured on the structural insurance is calculated by multiplying the built-up area with the construction area of per square foot.

While homeowners should opt for structure insurance, tenants should buy content insurance. Tenants should, in addition, research relevant insurance options for their rented property. However, it is advisable to opt only for content insurance to protect belongings. It is also a common practice today for landlords to request their tenants to opt for content insurance when choosing a rental living arrangement.

The other side of renters’ insurance is landlords’ Insurance. In addition to structural coverage, it offers loss of rent and public liability coverage. This cover is offered only to non-manufacturing premises and is often tailor-made. Apart from these basic home policies, the market is ripe with specialised policies for valuables and special perils.

A collector of valuables should invest in a policy that offers coverage for art collectables, antiques, paintings, jewellery and other high-value items. Loss, theft or damage of such valuable items would create a huge dent in personal investment, which makes insurance indispensable. It is recommended that the insured study the policy wordings carefully to know the definitions of valuables, as not all high-value items are insurable.

Another aspect of home insurance to look into is the liability coverage that safeguards the insured in case any visitor or trespasser meets with an accident within the property of the insured. In such an event, the homeowner is liable for any such damage and medical expenses arriving due to the incident. Liability coverage prevents the insured paying out of pocket at a short notice. It, however, doesn’t cover intentionally inflicted injury. Every coverage comes with its own specific exclusions and scope. Policy wordings are the best guide to know the exact scope and quantity of coverage. Read it carefully before purchasing your home insurance.

In sum, there are various types of insurance policies that cover your home. They range from a basic policy, which simply covers the cost of the structure of your home, to those that will provide a much broader range of protection, including contents as specified above. Some products will also provide coverage for additional living expenses, if you are temporarily unable to live in your home because of a disaster. In fact, your home insurance policy can also cover your home against burglary or theft even when you are travelling outstation for a brief

period of time. There are many more covers depending on the plan one

opts for.

As far as the premium is concerned, it will be approximately Rs 4,000 for a basic quote of the home insurance policy. This premium will cover the reinstatement cost (for dwelling/structure) up to Rs 20 lakh and a content cover of Rs 7 lakh. Jewellery will also be covered up to Rs 2 lakh, but within the sum insured of contents. This premium is for one year however discount is available for higher

tenure policies.

The author is Chief - underwriting, claims & reinsurance, ICICI Lombard. The views expressed in this article are his own.