Almost every year, natural disasters cause loss of life and property in India. On 7 February, a glacier burst at Joshimath in Uttarakhand’s Chamoli district left several dead and caused major damage to property. About four other districts were put on high alert.
When a natural disaster strikes, home insurance can come in handy to tackle losses. “Not many people buy home insurance, unless a lender pushes it when an individual is taking a loan, even though its essential,” said Nikhil Apte, chief product officer, product factory (health insurance), Royal Sundaram General Insurance.
At present, there are two types of property insurance available—a basic fire cover and a comprehensive policy. The latter is also known as a householder’s policy.
The fire policy covers a structure against fire, lightning and flooding. Some policies may not cover earthquakes. However, they may offer the cover as an add-on. Insurers don’t offer a cover for earthquakes as part of the policy as the premiums differ, depending on which area is more prone to earthquakes.
A comprehensive plan not only covers a structure against natural disaster but also the items inside the house. For example, it covers loss due to burglary and theft, breakdown of electrical equipment, and so on. It may also offer other options such as personal accident cover as add-ons.
“From 1 April, the Insurance Regulatory and Development Authority of India (Irdai) has asked insurers to launch a standard product. It will offer cover against a wide range of risks such as natural catastrophes and damage due to riot, strike, malicious damages and so on,” said T. A. Ramalingam, chief technical officer, Bajaj Allianz General Insurance.
Under this, the insurers will cover the structure as well as the contents of the house. Unlike in the current plans, policyholders won’t need to declare the details of the contents, which will be covered for 20% of the sum insured, up to ₹10 lakh.
Besides, insurers may offer two add-on covers. One, for valuables such as jewellery and curios. Two, a personal accident cover for the insured person and the spouse.
The policy will only compensate the individual for the cost of construction. ““Before taking the cover, the insurer and customer will agree on the cost of construction on reinstatement value basis. In case the property is damaged, the compensation will be based on the same,” said Ramalingam. For example, if the cost of construction is ₹3,000 per sq.ft for a 1,000 sq.ft property, the sum insured will be ₹30 lakh.
According to Apte, insurers reimburse the policyholder once the reconstruction starts.
