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Insure your dream house

Rajesh Nair

The monsoons are lashing. Ever gave a thought to what would remain of your house if the water trickled into the meter room and caused a devastating fire?

Along with your priced possession and the life long asset, the zest for working towards fortifying your living itself, would suffer severe damage. Unless of course, your house and the contents therein, are comprehensively insured.

Thanks to the householders insurance policy, not just your house, but all your belongings including domestic and electronic appliances can be insured against fire, terrorism, burglary, and natural calamities like earthquake and floods.

Depending on the kind of policy you buy, the insurance company reimburses an amount as laid down by the terms and conditions of the policy.

There are quite a few insurers that offer householders insurance policy - four public sector players (New India Assurance, United India Insurance, Oriental Insurance and National Insurance) and private players like Royal Sundaram Alliance, Tata-AIG, Bajaj Allianz General Insurance Company, ICICI Lombard.

All the policies insure you against loss or damage to the house and its contents, including jewellery and other valuables and domestic appliances, third-party liability and even loss of baggage during travel.

The coverage is available under 10 sections, each of which covers a contingency or a product at a nominal premium. What's more, the policy also covers the occasional accidental breakdown of domestic appliances and certain eventualities.

There is precious little difference in the premia charged by the public sector players across their policies. So, it hardly makes any difference in terms of choosing the insurer while considering to buy a policy from the public sector players.

However, what's important is to understand what the policy covers and excludes, and determine which sections are best suited for you.

In the case of the PSU players, three out of the ten sections available are compulsory. While the first two sections are mandatory, you have an option of choosing at least one from the remaining eight. With private sector insurers, the first section is compulsory, while you have an option of choosing any or all of the remaining sections.

The base policy (Section 1) comes in two sub-sections. One covers the building, and the other its contents (excluding jewellery and valuables), against damage from fire and allied perils - specifically structural and other damage from fire, lightning, riots, explosion of gas in domestic appliances, riots and Acts of God (floods and earthquakes).

This section is compulsorily covered under the householders insurance policy across all insurers.

While the householders insurance has to be renewed every year, for those who are specifically interested only in covering their building and contents against the perils of fire, there is also an exclusive fire policy. This can be availed for a period of five or ten years.

What's more, such policies also come with a 25 per cent and 50 per cent discount on the premia for policies with a tenure of five years and 10 years, respectively.

Section 2 covers the loss or damage to the contents of your house when it's burgled. The cover excludes jewellery, gold and silver articles, securities, cash-and televisions and bicycles (which are covered under other sections).

While this is the second compulsory section as regard the PSU players, in the case of private sector players, including this, you have an option of nine sections to choose from. Obviously, one needs to only pick and choose those sections that seem essential.

The painful aspect of choosing the various sections includes providing for elaborate details of all the items included.

Says an officer at New India Assurance Company, "All the details including the model number, name of manufacturer, year of purchase, value and any peculiar specifications of a gadget will need to be mentioned. This helps in easier settlement of claims."

Moreover, every time you acquire a gadget that you might want to include, the cover will need to be revised. The insurer would not compensate you for the loss of items that did not get included in the enhanced cover.

We would suggest valuables such as jewellery to be best kept in bank lockers. However, if you still decide to keep them at home, you could take cover under Section 3. It provides for 'all risks' cover against loss or damage to jewellery and valuables. Here too, it's important to provide a break-up and specific details of each item insured.

Section 5 provides cover against accidental breakdown of electrical, electronic and mechanical gadgets like refrigerators, air-conditioners, microwave ovens, washing machines or motor pumps (televisions are covered under Section 6). It is important to note that the sum insured should be equal to the gadget's replacement value.

If your five-year-old microwave can be resold for Rs 10,000 but will cost Rs 20,000 to replace, you won't be eligible for full settlement on your breakdown claims unless you are insured for Rs 20,000.

Losses which can be repaired will be settled by paying the repair cost without applying any depreciation. In case your microwave becomes useless, depreciation at the rate of 10 per cent per year up to a maximum of 50 per cent will be applied depending on the age of the microwave.

Section 6 covers the loss or damage to television sets and VCDs/VCRs/VCPs and computers against all types of risk-fires and allied perils, theft and accidental breakdown.

The cover applies even if the TV is damaged when it is accidentally dropped while you are moving it within the house. In both sections 5 and 6, items more than 10 years old are not insured.

The untouchables

You would observe from the above that we haven't made a mention of sections 4, 7, 8, 9 and 10. Section 4 covers damage or loss to fragile items like plate glass. And unless you are someone with a fetish to collect glass items, this section can be conveniently missed.

Section 7 covers loss or damage to a bicycle. Section 8 covers loss of or damage to baggage while you're travelling in India. Section 9 offers personal accident cover.

This, in our opinion, can be bought as a stand-alone policy. Unless of course, you want to include it as an add-on so as to help you lower the premium (if you buy five to six sections, you're entitled to a 15 per cent discount on the premium on the optional sections; for more than seven sections, you get a 20 per cent discount).

Section 10 covers your legal liability to a third party for personal injury or property damage. For instance, if the flower pot from your garden falls on the windshield of your neighbour's car, you're liable to compensate for the damage.

Although it comes cheap, we think, it is useful mostly for people with lousy neighbours.

In effect, it is pertinent for each individual to assess their risk probability and choose only those sections that match the need. Naturally, this will ensure that for an optimum cost, you can enjoy the monsoons while the security of your home and the articles in it are safeguarded.

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