Take a home cover and sleep well

As devil is in the detail,do not forget to study the policy closely and make itemised declaration of household belongings

Written by Ritu Kant Ojha | Published:January 16, 2012 2:18 am

Cricket maestro Sachin Tendulkar made headlines last week when bought a home insurance cover of Rs 100 crore. He is not only aware about the risks on the cricket field,he seems to be well informed of the risks like fire,natural calamity,burglary and theft. Reports suggest Tendulkar took an insurance cover of R 25 crore for household items in his Bandra home. The question one may ask is: why would a person as rich as Tendulkar need to cover his home and belongings?

You would get the answer once you try and imagine a situation wherein you come back from the office to find someone has broken your lock and taken away jewellery,electronic equipment etc setting you back by several lakhs of rupee.

Similarly,things bought through years of savings would vanish in a matter of minutes due to fire or natural calamity. While you cannot do much to prevent such incidents,beyond basic security measures,a household insurance is something you must have in your kitty. Such policies are available at a premium that on an average cost Rs 5 per day.

It is a policy that is designed to cover various risks and contingencies that any home owner might face. However,the insurance company may be quick to reject the claim if the fine print has not been understood.

The value of home structure is assessed by multiplying the area by the rate of construction,as on the date of taking the policy. For example,if your home is 1,000 square feet and the construction rate per square feet is R 500,then the sum insured for your home’s building structure would be Rs five lakh. While the home loan providers may insist on insurance for the entire loan amount,you need to take into account cost of construction on the built-up/ carpet area and exclude the land cost which is not covered.

On the other hand,the belongings inside the house are assessed on their market value. This means that the claim would be paid on the value of purchasing a similar new item,minus depreciation for the usage.

There are several clauses which you must look at before choosing which policy suits you best.

What is covered

Home insurance normallycovers most of the natural and man-made calamities.

* Fire

* Lightening

* Explosion/ implosion

* Aircraft damage

* Impact damage

* Riot,strike,malicious and terrorism damage

* Storm,cyclone,typhoon,tempest,hurricane,tornado,flood and inundation

* Subsidence and landslide including rockslide

* Bursting and/ or overflowing of water tanks,apparatus and pipes

* Missile testing operations

* Leakage from automatic sprinkler installation

* Bush fire

* Earthquake

The buildings and contents are covered for these perils. The sum insured is either on the re-instatement value or the market value. However,remember that depreciation would be applicable while calculating claim amount.

* Burglary and theft

Remember to check the policy wordings carefully as there is a technical difference between a theft,robbery and burglary.

According to HDFC Ergo general insurance,“burglary is said to take place when there is a forceful entry into the premises in order to rob while theft is said to take place when there is a robbery without any evidence of a forceful entry in the premise.”

The damage caused due to housebreaking and theft is normally covered.

* Optional cover for terrorism

Most general insurance companies provide a cover for acts of terrorism at an additional premium which you can opt for.

Common exclusions

While insurers may have different list of exclusions and the policy must be checked for exact wordings,normally any loss or damage suffered to the following is treated as an exception and are difficult to claim. The exclusions are the trickiest part and must be checked from the insurer should there be any confusion.

* Consumable articles

* Money/ securities/ stamps/ stamp collection

* Bullion and livestock

* Motor vehicles and pedal cycle

* Deeds/ bonds/ bills of exchange/ promissory notes/ shares

* Books/ manuscripts

* Loose precious stones,jewellery and valuables

Devil is in the detail

“Unless declared” is the term you must be most cautious about. An insurance company has no magic wand to find out,after a claim has been made,whether what you are claiming is correct or not except when some concrete proof is provided.

A lot of people do not make itemised declaration of their belongings and repent at the time of claim settlement. Make a list of each and every item and indicate the value against it. Do make sure to keep the bills and other proof of purchase as you may be asked to produce it at the time of claim settlement.

Jewellery is one of the most common and high value item which is normally ignored by the insured. “It is always better to prepare a list of such items to be insured. A valuation certificate of gold and other jewellery can come handy,” said Tapan Singhel,chief marketing officer,Bajaj Allianz General Insurance.

Another important point that needs to be checked is the sub-limits mentioned in the policy. The claim is subject to various caps on computers,refrigerators,gold jewellery,etc. This might come as a shock at the time of claim settlement so understand the policy before signing on the dotted line. As soon as you spot a loss,make sure to inform the insurer immediately. In case of a theft,file a first information report (FIR) in the nearest police station and inform the insurer.

Fire,earthquake or any other natural calamity do not give any advance warning before coming. Similarly,increasing cases of burglary,theft,and terrorism call for a careful assessment of risk and cover it through an insurance policy.

— ritukant.ojha@expressindia.com

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