All about home insurance

I shell out just Rs 10 every day to cover the valuables of my home." This was the quick response of Viswanathan Iyer, when asked why he took a home insurance. His residence has had a cover for the last five years. Iyer says: "I own a house in Mulund West, Mumbai, and have insured it - including valuables such as jewellery, television and other electronic items in the house - or Rs 20 lakh (Rs 2 million). My premium payout is Rs 3,240 a year."

Everyone would recall the deluge that wrecked Mumbai on 26 July last year. It is interesting to note that while motor claims were piling up, insurance industry says, claims for home insurance were few and far between.

Smart tip
Get discounts of 15-20 per cent on the premium by buying cover under four to six sections of the home insurance policy and above 20 per cent for coverage in more than six sections.

Most insurers say there has not been any drastic increase in the number of people taking home insurance this year, despite the experiences of the past year, and its penetration is still very small. Insurance Regulatory and Development Authority chairman C S Rao points out that the awareness about taking home insurance is low compared to life insurance and health cover. Most people don't know that the premium to be paid is considerably small for the value insured.

Does your home need insurance?

If your answer is yes for the following questions, then you would probably require an insurance cover for your home.

• Is the structure of your home worth over Rs 500,000? (The value of the building and not the market value of the property.)
• Does your home have valuable plate glass doors and windows?
• Do you own electronic gadgets worth over Rs 200,000?
• Is your house located in an area that is prone to the risks of floods, earthquakes or burglaries?
• Are you living in a rented house, but own high-value domestic and electronic appliances? Do you have expensive furniture?

Though Iyer has not made any claims, he continues to renew his policy every year. The 40-year-old man's line of reasoning is that with hard work he managed to build a home and acquire valuables, the loss or damage of which will be large. "I see it as Rs 10 a day, less than the minimum auto rickshaw fare. I earn over Rs 10 lakh a year and the premium payout is a small fraction of my income," he says.

If you are wondering why, despite its benefits, your agent is not pushing for a home insurance, here's your answer: the premiums are small and so are the commissions. And commission largely drives agents.

S S Gopala Rathnam, president (operations) Cholamandalam MS General Insurance, says the agent feels there is an opportunity loss in selling home insurance. He would rather choose to sell a cover that fetches him more returns. In fact, agents usually insist that customers choose more segments under the home cover so that the ticket size increases and becomes attractive for them. Enhanced cover also ensures discount for the customer. 

What can be covered

Home insurance can cover losses to the structure and contents of your home from any natural or man-made calamity. The disasters that can be insured against are fire, earthquakes, storms, cyclones, tempests, tornadoes, hurricanes, floods or inundation, lightning strike, explosion, landslides, impact by vehicles or aircraft, and bursting or overflowing of water tanks and pipes.

Burglary cover. Loss due to burglary or an attempted robbery of valuables such as jewellery and silverware can also be covered.
Alternative accommodation. In case the family is forced to shift to an alternative accommodation because of an insured peril, the cost of the additional rent will be taken care of.
Breakdown of domestic appliances. Home insurance covers the breakdown of ACs, and refrigerators. If there is accidental electrical or mechanical failure of domestic appliances, losses that can be repaired will be settled by repaying repair cost without applying any depreciation by the insurance company. But items that are over 10 years old will not be insured.

Benefits of taking home insurance

Cost of premium is small. The cost of the insurance premium in comparison with the value and cost of the structure and contents, domestic and electronic appliances, is less than one per cent.

Policy covers a range of segments. Home insurance covers almost all kinds of catastrophic risks, from damages arising from terrorist attacks to breakdowns of water tanks. The choice is yours - if you think your home is not going to be damaged by a terrorist attack, you don't need to cover it. In case you are living in a rented house, you can choose to insure only the contents. 

Covers cost of temporary shelter. In case of fire or damage to your home, which makes it unlivable, the cost of temporary rental for six months not exceeding Rs 1 lakh will be covered.

Buy it online. It is simple and easy to buy home insurance. You can buy it online as well. Just log on to any of insurance companies' websites and fill the necessary details to buy a policy.

How to claim

• Call the insurance company call centre or your agent immediately. Keep these phone numbers in the emergency list.
• Write a letter stating all the damages in detail and take a copy of it before sending it to the insurance company.
• Take photographs before cleaning up and salvaging what is left.
• Keep damaged material for proof of loss.
• In case of burglary, report it to the police.
• Ensure that you keep a copy of all information and receipts.

On The Platter
	Building (20 lakh)	Contents		Domestic				Premium
		(against fire,		Plate electronic			Personal
		burglary) (4.25 lakh)	Jewellery (1 lakh)	Glass (1 lakh)	appliances (1.5 lakh)	Computer -75,000	Accident (6 lakh)
Bajaj Allianz	1,000	1,169	1,000	1,000	1,125	-	900	6,194
Cholamandalam MS	1,000	425	1,000	1,000	750	750	350	5,275
ICICI Lombard	1,200	680	750	500	375	750	600	4,855
Royal Sundaram	1,200	1,275	1,010	1,010	375	773	-	5,643
Tata AIG	1,000	1,233	1,000	1,000	1,125	-	540	5,898
All figures in rupees; figures in parentheses denote insurance cover; The figures in bold are the cheapest option The segment and benefits under home insurance vary from company to company. The above table does not include the special discounts offered by insurers and service tax of 12.25 per cent.