Save up some cover for that rainy day

Come June and the monsoon will knock at our door. Weather officials have already signalled that the rains will hit Kerala in the next three to four days. Not long ago, many cities and towns were hit by floods brought in by the torrential rains. Maybe it’s time for you to protect your house and belongings. Home insurance policies, offered by general insurance companies, cover your home against risks from natural calamities such as fire, floods, earthquakes, or land slides. Apart from this, there are various sections of the policy that broadly covers the structure of the house alone, or your belongings such as jewellery, furniture, electronic appliances etc, or even both. Some policies even cover your rent expenses if you have to move out to another house because of the damage to your own house. Why home insurance? First and foremost, the possibility of your house getting damaged by floods may not seem like an incident of rarity if you recall the deluge that hit Mumbai on July 26, 2005. “If you say that it was a one-time deluge, such once in a blue moon incident can cost you a fortune,” says a relationship manager with Cholamandalam MS General Insurance. According to official statistics, the 2005 flood damaged over 1,87,000 houses across Maharashtra, affecting eight lakh families. Secondly, the premiums are reasonable for home insurance when you compare it with the single largest investment of your life. It works out to approximately Rs 60 per lakh to protect the house structure. Even for furniture, the premium is Rs 60 per lakh. For electronic appliances, the premium amount will be 1% of the value of electronic goods. “The premium depends on a variety of factors related to the size of the home, geographical location, type of construction etc. Home insurance is not applicable to kutcha (under constructed) dwellings,” says ICICI General Insurance director, retail, Neelesh Garg. Discounts for opting for multiple sections within the policy are built into the plans. You can get discounts of 15-25% on premium if you sign up for more than four to six sections of the home insurance policy. Calculating the sum insured? While insuring your home, the insurer always looks at reconstruction value. Reconstruction value is the cost you incur for redeveloping your damaged house. This value is different from the market value. Sum insured is calculated by multiplying the built up area of your home with the construction rate per sq. feet. For example if the built up area of your house is 800 sq. feet and the construction rate is Rs 800 per sq. feet then the sum insured for your home structure would work out Rs 6.4 lakh. Most insurers give details on construction costs in their websites. According to industry estimates, the reconstruction value is Rs 800 in big cities like Delhi, Mumbai, Bangalore etc. In tier II and ties III towns, the reconstruction value is Rs 600 and Rs 400, respectively. Insurers deduct depreciation on furniture, durables, clothes, utensils etc. while calculating the value of your home. However, most insurers do not apply depreciation to jewellery. How to file a claim? In case of any loss or damage to the home, you have to immediately inform the insurance company or your agent. “Submit a written claim document to the insurance company within the stipulated period. This claim document should contain a detailed account of the articles lost/damaged and the actual value of each article,” says Mr Garg. The claim request will be sent to the company’s claims department. Insurer’s surveyor will submit the final survey report (FSR) along with the documents submitted by you. On receipt of the documents, the claims department processes the claim. On approval of the claim, a letter is sent to the insured giving the approved amount of settlement along with the discharge voucher. Payment cheque is released on the receipt of the signed discharge voucher. The documents the insured have to submit will vary from reason to reason. However, they broadly include the filled claim form, photocopy of the policy, final police report and copy of all invoices, repair estimates etc. Since it’s a structured product and the premium is economical, this policy may be worth a look. Better safe than sorry.

Source: The Economic Times