Safeguard Your Home With A Householders’ Insurance Policy

Home cover is one of the most neglected kinds of insurance in our society. Jay Sampat tells you what to look out for when getting your house insured.

Natural disasters always bring the householders’ insurance policy into focus. It is, however, amply clear that such calamities haven’t made us any wiser with respect to insuring our property. How else would you explain the fact that only a miniscule percentage of the affected people tend to have adequate cover for their house and other belongings? The worst part is that even those who are adequately covered often find the compensation lacking and face inordinate delays in getting it. What is the way out, and what should be done to mitigate the unforeseen losses?

Experts suggest that a good starting point is to minutely check the details of the insurance policies you are planning to buy. Most of the general insurance products being offered in the market today do have sufficient cover for all kinds of perils that result out of force majeure and natural calamities.

As far as businesses and infrastructure are concerned, fire and project insurance with earthquake extension is appropriate. For individuals, home insurance (with adequate extension on earthquake) and Personal Accident policy with a motor insurance cover is a suitable solution.

Here, let’s consider the householders’ insurance policy. Such a policy can be taken by anyone who owns a house or is residing in a rented house, the only criterion being having an insurable interest in the property. Moreover, since the starting premium in most cases is as low as Rs 500 per annum, the age of the person and his/her socio-economic profile should not prove to be a deterrent for signing up.

When choosing a policy, while price is an important factor, it is important to remember that you are buying a service as well as a product. Hence, while most packages would be priced at a similar scale, find out the additional benefits they come with. Also, ask acquaintances about the company’s claim-paying history and level of service – a factor that is key when making a claim.

The most important thing in the householders’ insurance policy is the home, which needs to be adequately covered. These days, some home loan companies insist on having the property covered under insurance. Very often, however, the sum insured in such cases is to the extent of the loan amount, which is not the right way to arrive at the sum insured.

To arrive at the correct value of the sum insured which would cover one’s home optimally, the following steps need to be followed:

1) As regards the valuation, what needs to be accounted for is the cost of construction only, excluding the land value, as a home insurance policy covers only the reinstatement value of your house and not the market value. The total cost of a house also includes the cost of land, which cannot be insured.

2) Contents like electronic items, jewellery, etc. need to be insured on an actual basis, i.e. itemised. It is always better to prepare a list of such items. A valuation certificate of gold and other type of jewellery would also be helpful in this regard. Always remember to insure contents for their present replacement value (new), as insurance companies reimburse without depreciation in the case of repair/partial claims.

3) For all other contents, one can have a thumb rule of 12 months of the family income as the cost. There is no need to have an itemised list for these if the value of any of these assets is less than 10 per cent of the total sum insured.

4) Assess the premium amount for covering your home and its contents. The householders’ insurance policy for a family with an annual income of Rs 3 lakh may cost between Rs 5-10 per day.

This apart, in the case of valuable contents, it is important to have an inventory by room together with information such as the purchase date, the original cost and a brief description of each item. Photographs may be helpful to support the inventory. These items should be stored in a secure place such as a safe deposit vault in a bank and not at home, because if the home is destroyed, chances are that the inventory too may be destroyed.

In case of a loss to any insured item, the concerned insurance company should always be informed immediately. For loss by theft, first file a police report right away and then inform the insurance company. Some companies like Bajaj Allianz and Royal Sundaram have 24-hour dedicated call centres to register claims.

There is too much at stake with householders’ insurance and it is easy to lose everything if one is not covered adequately. Hence, it is highly recommended that one buys this product after understanding it in detail and not because it is being hawked aggressively by the friendly neighbourhood agent.