House and car affected by floods? Use insurance smartly to cover losses

Climate change has gone local. Cities and towns are witnessing once-in-a-lifetime events once every four-five years as flooding and cyclones are increasing in frequency. Chennai, and earlier Bengaluru, faced excess rains that beat 100-year records, that too in the same year. Given the increasing threat, one should assess the extent of flood protection available through insurance. Are the car and house protected, and to what extent are they protected?

We look at the ways insurance covers the assets and the factors improving efficiency of insurance.

Home insurance

Home insurance covers the building or the content or both. So a tenant would look for a content cover, while an owner-resident would go for building-plus-content cover. Building refers to the physical unit and accounts for the largest part of the sum insured. Television, ACs, white goods and even desktop computers are covered under the ambit of content covers.

Home insurance policies, content or building or both, cover all risks — man-made or natural. Under natural risks, earthquakes, fire, floods, storms, inundation, and landslides are covered. The exclusions are self-damage, wear and tear, war or losses due to bad construction. So water seepage losses, breakdown of electrical items and rodent damage may not be covered. Cash stored at home is also excluded and so are portable electronics and valuables not covered in content insurance. To insure jewellery stored at home, a specific insurance may be best suited as valuables worth more than ₹2 lakh may not be covered by home insurance.

The annual premium to insure a building of ₹1 crore and contents up to ₹20 lakh would cost ₹3,000 to ₹5,000 under different versions of Bharat Griha Raksha scheme offered by different insurers. The range is on account of differences in services, pricing ability, claims processing and settlement process of each insurer. Bharat Griha Raksha is an IRDAI-standardised policy that allows for 20 per cent content insurance, without the need to disclose contents. Other insurers may offer a more customised content or building insurance but will need a detailed specification of contents.

For pincodes within a city which faced flooding now or earlier, acceptance of home insurance application may not be a given. That is all the more reason to go for home insurance at the earliest, if not protected. Also, with increasing frequency of flooding, the cost of insurance will increase with every episode of flooding or cyclone. This because the cost of doing business in that city/area/pincode increases for insurers, which will creep into premiums. With insurance companies offering longer term policies of 10 years or so, it may be prudent to lock in a long-term protection when available.

Car insurance

A comprehensive car insurance covers protection from natural calamities, including flooding. But there is a lot of fine print, from protection to actual reimbursement within car insurance. For instance, with regard to protection in times of flooding, it is critical to inform the insurer and arrange for a check-up with an approved garage to secure the protection.

After a car is inundated, trying to start a car will result in engine seizure or cause fatal damage to the car. Insurer will refuse to cover, if a flooded car was started or an attempt to start was made. The insurer has to be informed before any attempt is made and any repairs should be done in approved garages for insurance to kick in. Getting repairs done in an unapproved garage can also lead to claim rejection in some policies.

To address replacing an engine with insurance reimbursement, an engine protection add-on may be recommended. Comprehensive car insurance does address engines, but total replacement or extensive damage to internal parts may not be covered. The cost of engine protection add-on would increase the premium cost by 5-7 per cent and should be considered.

Other key add-ons for better efficiency of car insurance are zero depreciation cover, which protects against depreciation while reimbursing against damage, or 24*7 roadside assistance for towing and better protection but restricted to high population zones. The 24*7 road assistance would also let one tow the inundated vehicle to a cashless garage for a prescribed check-up, simplifying insurance payout.

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