Risk cover: A home insurance policy protects the contents and structure of your home against unforeseen dangers

The Advanis have braved many a monsoon in Mumbai for the last 27 years. But the deluge on July 26 this year reduced their 700-sq ft ground floor residence to a waterhole. The family claimed insurance for damage to the property but ended up incurring a loss of over Rs 50,000 as it had not insured its personal computer, fridge and cellphones.

Like the Advanis, most of us ? at some point or another ? invest in property insurance but are unaware of a home insurance policy. Says Arnab Rai, manager, agency operations, Tata-AIG, “Indian households have always focused on personal insurance. Insuring the home has never been a priority.”

But the times they are a-changin’. With the recent floods in Mumbai, Chennai, Bangalore and Calcutta, the number of home insurance policies being issued is on the upswing. Karan Chopra, national manager, ICICI Lombard, points out, “The home insurance premium has witnessed an increase of around 20 per cent.” According to N.K.N. Swamy, an insurance agent, the increasing number of new residences has also contributed to this growth.

Companies such as Oriental Insurance, National Insurance and HDFC Chubb have reported an increase in business in this segment. HDFC Chubb, for example, sells home insurance policies worth Rs 1 lakh every month.

A home insurance policy protects the contents and structure of your home against unforeseen dangers. These include perils such as fire, damage by aircraft as well as natural calamities such as lightning, cyclone, flood, landslides and inundation. Besides, the policy also covers jewellery and other valuables. “This policy acts as an effective risk management tool against calamities and also protects a household from financial loss, in case of an untoward incident,” stresses Vinay Jha, retail business head, HDFC Chubb.

While assessing the value of the residence, insurers don’t include the value of the land; rather, they insure it on its marked price. Also, if one stays in a rented apartment, the insurance company only insures household items and not the house. For gold items, insurance companies prefer a certificate stating that the value is above Rs 5,000. Swamy explains, “Gold jewellery in most Indian households is seldom purchased with a legal receipt. This makes it difficult for insurers to estimate the value of a gold item. A certificate acts like an assurance for the company with respect to purity and authenticity.”

Home insurance policies have the least premium. P.K. Pradhan, direct agent for Oriental Insurance in Calcutta, points out that the annual premium in home insurance begins at as low as Rs 900 and goes up to Rs 4,000. The policies are usually for a year and are easily renewable. When parties file for claims, the company reimburses the value of the product at its depreciation or appreciation value after scrutiny.

Agents state that among the public sector insurance companies, National Insurance’s home insurance policy is considered to be better than that of the others. That’s because it insures against a large number of accidents and offers a personal accident cover, along with the home cover. In the private sector too, some companies offer good incentives. ICICI Lombard, for instance, covers loss of cash, public liability, temporary resettlement, alternative accommodation and baggage insurance. In addition, certain add-on covers such as rent for alternative accommodation and cover for terrorism are also included.

Small wonder, then, that insurers stress that it’s wise to include a home insurance policy in one’s financial portfolio. As Jha of HDFC Chubb puts it, “Our home may not always be the safest place on earth, why take a risk?”

rate plan

at a premium: The Insurance Regulatory Development Authority (IRDA) of India has prescribed the rate of premium, which is common to all companies irrespective of whether they are public or private. For instance, for a dwelling residence, it is 0.50p/mille (per thousand rupees of the item’s value), and for domestic appliances, Rs 2.50/mille. But, certain riders are attached to this. Often, items of art are not included in this policy.