Experts say home insurance, which can be purchased by homeowners or tenants, can help residents cope with losses from natural disasters
Recent rains in Chennai have served as a reminder of the huge losses the city’s residents suffered in the 2015 floods. However, there is a way to reduce the impact of such losses if people opt for home insurance.
There are two types of insurance available: home construction coverage for the building structure of the house and home contents coverage for objects or items in the house.
The current size of home insurance is around 2% of the total premium written by P&C insurance companies in India, according to Sanjay Datta, head of underwriting, claims and reinsurance at ICICI Lombard General Insurance.
According to data from the General Insurance Council, the gross direct premium written by general insurance companies in India was 1,77,462.64 yen for the fiscal year 2020-2021.
Industry experts attribute the lack of awareness and perceptions such as “it is not necessary to purchase home insurance” and the likelihood of damage from events such as natural disasters as the reasons for the low penetration. .
General insurance companies have launched a standard home insurance policy. This was based on the instructions issued by the Indian Insurance Regulatory and Development Authority that all general insurance companies should launch a standard home insurance policy called “Bharat Griha Raksha Policy” from April 1. 2021. If the house or the items in it are damaged, the police plan to pay the amount spent on the repairs. If the accommodation or items are lost or completely destroyed, it provides for the payment of the sum insured for that particular item, subject to conditions.
In accordance with the guidelines, if the construction of the house and the contents of the house are chosen, the coverage of the general contents of the house is automatically provided up to 20% of the sum insured for the coverage of the construction of the house, under reserve of a maximum of 10 lakh.
The customer can opt for additional coverages to the standard policy by paying additional premiums to cover valuable contents such as jewelry and personal accidents.
As per the guidelines, a homeowner or tenant can purchase insurance, as long as the home is used for residential purposes only and not for business purposes.
Common policy exclusions include any type of willful or intentional negligence or misconduct or violation of the law with criminal intent, among others.
While standard home insurance products are available, experts said there are some key things to keep in mind when choosing a policy.
“Under a comprehensive home insurance policy, although the insurer will not pay you for the normal wear and tear of your home, they will certainly pay you for all damage and damage caused by natural disasters,” including floods, earthquakes, cyclones, etc., ”said Tarun Mathur, general manager of general insurance at Policybazaar.com, an online insurance aggregator.
Remember that it is not only important to have a policy for the structure, but it is equally important to have adequate insurance for the other contents of the house, including furniture, fixtures, electrical and mechanical devices, ”he added.
Abhishek Mishra, CEO of insurance brokerage firm Bonanza Insurance, said one of the key elements in choosing a home insurance policy is to opt for replacement costs rather than the depreciated value of the asset. “If you choose the depreciated value of the building or other assets, the premiums will be low, but the insurer will not pay the full amount for the repairs. If you opt for the replacement fee, the premium will be higher, but it will be useful at the time of the claim and you will be able to recover the full value of the asset, ”he added.
Mr Datta said that in addition to carefully reading the terms and conditions of the home insurance policy, customers should also review the insurance company’s claims settlement ratio and deductibles.
The claims settlement ratio is calculated by dividing the number of claims settled by the number of claims received by the insurance company.
Deductibles refer to the amount an insured must pay before the insurance company starts paying. For example, if your policy deductible is 30,000 and the insured’s claim is 40,000, the insurance company is only required to pay 10,000. However, if the amount of the claim is less than the deductible, the insurer is not required to pay any amount. For high deductible policies the premium is lower while low deductible policies have a higher premium.
Adhil Shetty, CEO of BankBazaar.com, said another important factor is not wasting time when making a complaint. “Know the maximum time before which you must file a claim in the event of damage / loss of property. Waiting too long could potentially rob you of many applicable benefits. Again, full knowledge of your policy is crucial, ”he added.