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Insuring the home

india Updated: Apr 26, 2009 22:16 IST
Falaknaaz Syed

The biggest investment a person makes is in purchasing a house and filling it up with expensive furniture, electronic appliances, antiques, cash and jewellery.

However, an accidental fire, flooding during heavy rains, a burglary or any other natural calamity could wash away everything — and that is where the householder’s insurance policy comes to the rescue.

While a householder’s insurance policy is a must to protect your most treasured asset, the penetration level for this form of insurance stands at less than one per cent of the households.

What does the householder’s insurance policy cover?

All 21 non-life insurance companies offer this policy, which is a single policy divided into 10 sections protecting against fire and allied perils, burglary & theft, jewellery and precious items, plate glass, breakdown of domestic appliances, electronic equipment such as TV set, pedal cycles (all risk coverage with a third-party liability extension), loss of baggage while travelling, coverage for the insured for any death or disability, besides covering workmen whom the insured may have employed on wages.

The fire and allied perils cover is mandatory. You can choose a minimum of two other sections to complete the policy. In case of a burglary and theft cover, some insurance companies cover loss of jewellery and precious stones only up to 25 per cent of the sum insured or Rs one lakh (whichever is lower).

Optional covers

Insurance companies provide terrorism cover and additional expenses cover (where the insurer undertakes to pay you a certain amount for alternative accommodation in case you are forced to vacate the house due to any of the perils mentioned in the policy).

Value of your cover

Insurance companies will insure your house on the reconstruction value — that is the cost to rebuild the house. For instance, if the value of a person’s flat is Rs 50 lakh, inclusive of land cost, the floor area is 1,000 square feet, and the construction cost is Rs 1,000 per square feet, then the sum insured for the house would be Rs 10 lakh.

Insuring contents of the house

You can choose to insure the contents at reinstatement value (Which is the value for replacing the item with a new item of same type and make). At the time of loss the claim will be settled without applying depreciation.

You can also insure at market value (reinstatement value less depreciation depending on the age of the item) where the claim is settled after applying depreciation at the amount it would cost you to replace that particular item (reinstatement value).

“A valuation certificate for gold and other type of jewellery would be of help to value the contents. For all other contents, one can have a thumb rule of 12 months of family income as cost of all other assets,” said TA Ramalingam, head underwriter at Bajaj Allianz General Insurance.