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Business Today|October 07, 2018
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Best ways to secure your house from natural and other calamities.

Renu Yadav

A house is one of the biggest assets that one buys in one’s lifetime. But an unpredictable natural calamity, such as the recent floods in Kerala, can destroy your prized possession in no time. The tragedy gets amplified for people who have taken home loans. Therefore, insuring your house against natural as well as man-made calamities is imperative.

How a Home Insurance Policy Works

A basic home insurance policy provides cover against calamities such as riots, fire, explosion, etc. Some include burglary and theft, while others offer these as add-ons. One can buy a cover against terrorism as well. Broadly, there are three types of covers in the market — structure only, structure plus contents, and contents only. In the ‘structure only’ cover, land is not covered, though Bajaj Allianz has a policy that covers land too. Under the ‘structure only’ policy, the cover is calculated by multiplying the area of the house with the cost of construction in that area. For instance, if the built-up area in an upmarket Mumbai flat is 1,000 sq. ft, the market value of the flat may be ₹3 crore, but taking the cost of construction of, say, ₹4,000/sq. ft., the sum insured will come to ₹40 lakh (4,000 x 1,000).

“We have a provision for escalation in sum insured whereby the sum insured is automatically increased by 10 per cent in long-term policies on completion of every 12 months from the date of commencement of the cover. This will take care of the rise in the cost of construction due to inflation,” says Nikhil Apte, Chief Product Officer, Royal Sundaram General Insurance.

In a contents only policy, even a tenant can insure the belongings. “The valuation of the contents is done through a government certified valuer,” says Sasikumar Adidamu, Chief Technical Officer, Bajaj Allianz General Insurance. If you are securing contents, you can also cover the jewellery kept in lockers by declaring it to the insurer. “Household articles are insured on their market value, which means depreciation will apply in the event of a loss,” says Apte.

The tenure of the policies can range from one year to 20 years. Many insurance companies provide discounts if you take a longer-term policy. A basic home insurance is not very expensive and given the fact that a natural calamity can occur any time and at any places, it makes sense to purchase home insurance.

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October 07, 2018