Household Insurance

You save and scrounge over a considerable part of your lifetime to own the roof above your head and what's in it. Yet, you can lose it all in a few moments of madness an earthquake can raze your house to the ground, a fire can swallow your belongings, a burglary can leave a huge hole in your pocket. Insurance for the biggest material investment you are likely to make is all it takes to ensure that you never lose that sense of security.

WHAT IS IT?

A householder's insurance policy termed the Householders' Package Policy insures you against loss of or damage to your house and its contents, including jewellery and domestic appliances, third party liability and even loss of baggage during travel within India. Coverage is available under 10 sections, each of which covers a contingency or a product, at a nominal premium (See table: The Householders' Package Policy). The name and order of these 10 sections may vary across insurers, but the scope of cover is the same.

The base policy (Section 1) comes in two sub sections: one covers the building and the other its contents against fire. If you live in a self owned house, at the very least, you should look to buy cover under both sub sections of Section 1, and under Section 2.

If you live in a rented house, you can skip the building cover (unless it is stated in your lease agreement that you are responsible for the building), but you must have cover under Sections I (b) and 2. These are a pre requisite for. buying cover under Sections 3 10, which are optional. The cover you buy under these sections should be linked to the estimated value of the products or contingencies you are looking to take protection for.

The 'sum insured' stated in your householders' policy is the amount for which your contents are covered, with sub limits under each of the various sections you have opted for. Based on the nature of premium charged by insurers, the 10 sections can also be divided into two categories, : tariff (Sections 1 and 2) and non tariff (Sections 3 10). Effectively, while assessing insurers, the differentiating factors are the premiums under the non tariff sections and the quality of service offered.

FINE PRINT

1. There is no limit on the amount of cover that can be bought under the householders' package policy, but as the value of a property is considered while settling a claim, there's no gain to be made by overvaluing it. Say, you get your house, which is worth Rs 5 laky, insured against fire for Rs 10 lakh. If a fire guts the house, you'll get Rs 5 lakh (the fair value of the house) from your insurer, not Rs 10 lakh (the insured value).

2. The personal accident section covers only family members, that too only those whose identity is specified at the time of taking the policy.

EXCLUSIONS

1 . The policy doesn't cover loss or damage due to wilful negligence. For example, no compensation will be paid if goods are stolen from your unlocked house.

2. Each of the 10 sections of the householders' policy has claim limits and exclusions specific to them.

TIPS

1. If your house is in a seismic or flood zone, you must get building cover under Section I(a). The foundation of a house is endangered primarily by floods and earthquakes. By the same logic, if your house is in an area that is insulated from such natural calamities, you can even consider skipping the building cover.

2. Specify details of your valuables at the time of buying the policy. In the case of gadgets, for instance, state specifications such as name of the manufacturer, model name and number, date of purchase and price. Attention to such details can be tedious and time consuming, but it makes for smoother settlement of claims. Also, the householders' policy covers even the accidental breakdown of domestic appliances.

3. The other category whose details you should list is jewellery (description of article, material and weight). Ideally, get your jewellery valued by a certified valuer. If you keep only some of your jewellery at home at any point in time, and the rest in a locker, you can save on your premium by declaring your entire holdings but buying cover for only the value you keep at home.

4. Peg the sum insured of gadgets to their replacement value (w hat it will cost to replace them without requiring you to dig into your finances. Of relevance here is a claims concept called 'pro rata average clause', which penalises the insured for underinsurance of appliances and gadgets.

5. Review your insurance cover with each gadget purchase. You needn't wait till the time of policy renewal to effect such changes you can do it any time during the policy term. Approach your insurer with gadget specifications, and ask them to increase the sum insured in your policy. Similarly, when you sell expensive gadgets and appliances on which you're paying a decent amount as premium, get it removed from the policy (this can be done only at the time of policy renewal I, though) and reduce the sum insured.

6. There are discounts to be had on premium payments. Buying cover under four to six sections entities you to a discount of 15 per cent on the premium payable under the optional sections (Sections 3 10); this discount increases to 20 per cent if the cover is taken under more than six sections. For example, though personal accident cover is available as a stand alone policy, buying it along with your householders' policy might make you eligible for the discounts, and help you reduce your premium.

7.The fire cover for a house is linked to its building cost, not its market value. The market value of any house includes the land cost usually, the biggest cost component and the building cost. It's the building that's at risk from perils such as fire, not the land. Even if a fire razes the building you live in. the land will retain its original value. If you buy fire cover for your house on the basis of its market value, you'll only shell out a significantly higher premium for no additional benefit. 8. Some private insurers have started giving a noclaim bonus. Each year that you don't make a claim, you get a discount on your premium payable, of up to 5 - 10 per cent a year. So, if the premium charged by two insurers is identical, go with the one that gives you a no claim bonus.

MAKING A CLAIM

In the event of a burglary, fire or baggage loss, inform your insurer and file a police complaint, preferably an FIR (first information report). In case of a fire, you also have to get a fire report from the fire department. Raise a claim with your insurer, giving details of the case, extent of damages and the monetary loss.

A surveyor will assess the damage, and give his recommendations to your insurer. In case you're not satisfied with the surveyor's assessment, you can challenge it with the insurer, who will appoint another surveyor to give a fresh recommendation. If the stolen goods are recovered after settle the claim, it becomes the property of the insurer.

The procedure varies for claims related to public liability (loss or injury caused to another person). A case is filed in a civil court, which decides the compensation amount to be paid by the insurer.