Why home insurance is your shield against nature’s fury

Until a few years back, home insurance would have primarily been associated with protection from fire, burglars, or earthquakes. But after witnessing nature’s fury unfurl with increasing frequency in coastal and other rain prone areas in the country, incessant rains, flooding and storms seem to be a big risk.

If the climate change predictions hold true, the risk should manifest with an even more increasing frequency in coming generations. General insurers faced ₹4,800 crore claims, mainly from motor and home insurance, from 2015 floods in Tamil Nadu. The claims from recent floods in late-2021 are yet to surface. Similarly, Uttarakhand faced a similar wrath in 2013 and again in 2021. Home insurance may become a necessary purchase for most, in this scenario.

Inclusions and exclusions

Home insurance broadly covers three different assets - building, content and a combination of the two, which appeals to either home-owners or tenants. Content generally refers to furniture and other immovables like television, ACs and even desktop computers. It is important to note that portable electronics and valuables do not automatically fall in the purview of content. Building or structure refers to the physical units and accounts for the largest part of the sum insured. Cover for content is either a percentage of the building cover or provided on disclosure of contents.

Most home-insurance policies offer protection from risks which can be grouped into, natural and man-made. Natural risks arising from earthquakes, fire, floods-storms & inundation, and landslides are covered for both building and contents. Man-made disasters, including riots and malicious damage and terrorist activities as stated under India penal code are covered. The general exclusions, across policies cover the obvious conditions of self-damage, unmaintained properties, pre-existing damages, loss due to wear and tear and damages to property on order from government authority or court. The not so-obvious exclusions that one has to take note of include seepage losses (from water seepage), breakdown of electrical items, war, rodent damage and equipment related to home business. Cash stored at home is also excluded. Jewellery and portables are covered as an add-on or as a nominal cover.

Bharat Griha Raksha a standardized home insurance was introduced by IRDAI in April-2021 which all general insurers should offer. The policy differs from other customized products in two main aspects. The cover for content is provided for up to 20 per cent of the sum insured without the need for disclosure, under a comprehensive cover (building and content). The policy also disallows proportional claim servicing, wherein claims disbursed to claimed amount will be in the same ratio as sum insured to property value. Cover for jewellery and other valuables and also content cover in excess of 20 per cent is available on disclosure of the asset as well as its value. This cover will come for an additional premium.

Product pricing

For a building insurance cover of ₹1 crore and content cover of ₹5 lakh (which excludes jewellery and portable electronics) annual premiums would range from ₹4,000-5,000 per annum (for pincode in Chennai) compared to Bharat Griha Raksha’s price range of ₹2,000-₹5,000. Iffco-Tokio’s comprehensive plan for the same parameters would charge ₹4,062 per annum. Here, jewellery up to ₹50,000 is only covered, for a nominal additional cost while portable electronics up to ₹50,000 would add ₹330 to the annual premium. HDFC Ergo’s comprehensive cover has a premium of ₹4,883 per annum but also includes alternative accommodation and other emergency related benefits. The terms include a deduction of ₹5,000 for every registered claim. Electronics cover, limited to ₹1.5 lakh costs ₹2,250 extra and a ₹1 lakh jewellery cover costs ₹800 additionally per year. Go Digit General insurance offers Jewellery cover of up to 20 per cent of content cover or ₹5 lakh whichever is lower, for an annual premium of ₹4,119 ( for the same building cover of ₹1 crore and with content cover pre-determined at ₹10 lakh).

Pricing in Bharat Griha Raksha (see table) varies on differences in services, pricing ability, claims processing and settlement ability even as the basic structure is common across companies.

Other factors

In case of burglary, claims have to registered as soon as possible for most policies (7 days for Bharat Griha Raksha). Jewelry insurance may be best served by a specific insurance as Home insurance may be inadequate to cover valuables above ₹2 lakh, stored at home. Premiums are highly dependent on pincodes, so even across the same city premium rates can vary significantly Some policies also reject insurance for homes which have faced a flood in the last five years. The premiums will also be lower if security features like closed circuit cameras and 24/7 security personnel are available.

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