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Insurance Article

Home Insurance: Your Best Defense against Calamities

June 24 2015
insure-your-home-and-protect-your-financesInsure your home and protect your finances

Do Not Wait For a Disaster

Did You Know?

According to the National disaster Management Authority:
  • About 57% of Indian landmass is prone to medium to high intensity earthquakes.
  • While 76% of the total coastline face risk of cyclones and tsunamis
  • 12% of the northern plains face the danger of floods, each year

During calamities like floods and earthquakes, insurance companies experience a spike in inquiries, but very few of these translate into actual sales of policies.

A home insurance is like a ray of hope in difficult times. 

Why Home Insurance Is Not Widely Accepted

Less than 1 % of homeowners in India posses home insurance. The general reasons for such low penetration include the belief amongst people that they lead low-risk lives and the chances of a natural disaster striking them are low.

Many a time, financial risks are either not understood or the known risks are completely denied. In smost cases, one ends up paying heavily in the aftermath of a disaster due to lack of insurance cover.

Shocking Figures:

Given the minimal cost of home insurance, the penetration of insurance in the Indian sector is low. Of the $7 billion worth property destroyed by cyclone Hud Hud, that hit the east coast in October 2014, only around $600 million was insured. This accounted for less than 1 % of the total destruction.

Why Home Insurance is Practical

Although a home is the most expensive asset, many Indians are averse to home insurance. The cost of a home insurance policy comes down to a minimal premium once the losses inflicted by risks are calculated.

For example, consider insuring a house of a 1200 square feet area to cover loss caused by natural as well as manmade calamities, for five years. For a sum insured of Rs. 21.6 lakh, sum insured depends on area covered and cost of construction, the premium for five years, for a basic structure cover would be less than Rs. 5000.

This means around Rs 1000 per year, Rs. 3 per day. For content insurance and covers for additional risks like terrorism and costs for alternate accommodation, the premium would still fall under Rs. 10 per day, for a period of five years. These calculations include service tax.

What Are the Risks Covered In Home Insurance

Home insurance covers your assets against damages to your home caused by natural disasters like earthquakes, storms, lightning etc. and manmade disasters like fire, burglary and off late, against losses due to terrorists’ acts.

Home insurance does not cover damages caused willfully or any destruction due to war. If a loss or damage to insured property (structure or content) is caused during repairs, the insurance policy will not pay for it. In addition, contents like cash, paintings and works of art etc. are not covered under the content insurance.

It is also worth mentioning that insurance companies deny cover to the policyholder if the home insured remained unoccupied for more than 30 days prior to the occurrence of the risk insured. The condition for denial is that the insurer was not notified and/ or the house was empty for more than 30 days prior to the occurrence of the risk insured.

If Not Insurance, Then What?

In the event of destruction or significant damages to property, a person has to rebuild or repair using personal savings, in the absence of insurance. However, unlike with insurance, the loss is borne completely by the person. The savings compensate for the loss but at the cost of sacrificing other precious goals and dreams. Being insured can play a huge role in securing your finances in case of mishaps.

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