Property Insurance

The rising cost of home renovation and repair work clubbed with poor quality of materials being used in the construction of new houses have made these properties highly vulnerable to mishaps like fire, short circuits and damages due to natural calamities.

Moreover, the cases of theft and burglary have also increased especially in metro cities.

Even a minor damage caused by a short circuit or house-breaking can cost the property owner thousands of rupees in repairs to get the property back in its original form.

These reasons have created a need for PROPERTY INSURANCE that is rapidly gaining a lot of popularity these days for its ability to reduce the burden of major expenses that homeowners incur in repair work.

 

 

WHAT ARE PROPERTY INSURANCE PLANS?

A PROPERTY INSURANCE PLAN is a general insurance product where the insurance company enters into a contract with the policyholder and agrees to compensate for any financial loss that the policyholder incurs in getting the house repaired in the event of fire, burglary or occurrence of natural calamities.

It primarily covers the structure of the house where the inner walls of the building is insured and the policy holder can claim the amount that he had spent in getting the structure of the property back in its original form.

Please note, the individual houses are beyond the scope of building insurance as they cover the outer walls of the building only. Any damages caused to the inner walls of your house will not be covered under the building insurance. Hence, you needs to buy a separate cover for your house.

You can also cover contents in the house like furniture, electronics, jewellery etc. by paying extra premium.

 

 

TYPES OF PROPERTY INSURANCE PLANS

Primarily there are 2 types of PROPERTY INSURANCE.

1. Structure cover – These plans only cover the structural damage and expenses related to physical damage caused to the inner walls of the property due to various reasons like fire, natural calamities, forced entry by robbers, etc.

 

2. Structure with contents cover – These plans not only cover the structural damage but also loss of contents like electronics, jewelry, furniture, etc.

E.g. if a fire breaks out inside the house and various contents present in the property are gutted in the fire then the present cost after depreciation will also be reimbursed under such plans along with the repair cost of the structure of the property.

 

 

WHAT KIND OF EXPENSES DOES A PROPERTY INSURANCE COVER?

The following is the list of some of the most common expenses that PROPERTY INSURANCE PLANS cover.

• Fire
• Lightning
• Aircraft damage
• Explosion
• Natural disaster
• Landslide/rockslide
• Terrorist activity
• Overflowing of water tank
• Natural disasters
• Loss or damage to the insured property due to housebreaking or burglary
• Forced and violent entry

 

 

IMPORTANT POINTS TO NOTE ABOUT THE PROPERTY INSURANCE

The following are some of the important features of the PROPERTY INSURANCE that all subscribers are expected to know.

1. Payment mode – PROPERTY INSURANCE has the lowest premium across most insurance products available in the market. Individuals can buy a cover for up to 30 years either by paying a one-time premium or they can also choose to renew it annually.

 

2. Grace period for premium payments – In case of delay in renewing the policy, every insurance company generally usually allows a grace period of up to 30 days in case of yearly premium.

 

3. Freelook period – Free look period simply means that the policyholder has all the liberty and rights to refer the original policy document and cancel the policy without any cancellation charges during that period.

Every policyholder is allowed a free look period of 14 days from the date of receipt of the original policy document to review the terms and conditions of the policy and to cancel the policy if it deviates from what was committed.

 

4. Portability – If the policyholder is dissatisfied with the services of his insurance provider or getting better benefits with some other insurance company or want to change his insurance company for any other reason, he is allowed to switch between health insurance providers without losing certain benefits such as the waiting period for pre-existing illnesses, no-claim bonuses and other advantages earned in the previous policy.

 

5. Not 100% expenses are reimbursed – Property is a physical asset and its contents are subject to depreciation.

While honouring claims, an insurance company checks the original value of the asset, then applies depreciation to arrive at its current market value.

Due to this, the claim amount receivable by the policyholder reduces to the extent of depreciation adjusted.

E.g. If a fire breaks out inside the house and a television set is damaged, then the insurance company is not going to reimburse the cost of buying the new television set but they will assess the present cost of the old television by applying depreciation to the original cost of the television minus taxes paid. This significantly reduces the claim benefits.

Also, the high cost of high quality and expensive materials being used while constructing the house may not be reimbursed.

 

 

WHY YOU MUST HAVE A PROPERTY INSURANCE?

Every individual must have a PROPERTY INSURANCE for the following reasons.

1. It protects your savings and reduce financial burden – PROPERTY INSURANCE takes care of all the major expenses related to home repairs that could arise in case of major accidents or event like natural calamities, fire, etc. without depleting your savings.

 

2. Rising cases of accidental cases – The cost of house renovation in India has increased multifold.

Moreover, the rising cases of crime and burglary and poor quality of materials being used in the construction of new houses have made these properties highly vulnerable to mishaps like fire, short circuits and damages due to natural calamities.

Due to this, protection against the high cost of repairs has made PROPERTY INSURANCE a must-have product for all homeowners.

 

3. Substantial cover at a very low premium – PROPERTY INSURANCE has the lowest premium across most insurance products available in the market.

An individual can buy a huge cover of Rs. 50,00,000/- for 20 years at a one-time premium of as low as Rs. 25,000/- to Rs. 30,000/-.

 

4. Flexibility – An individual has a range of options to select from.

PROPERTY INSURANCE offers flexibility where you can opt to buy a cover either for fire, earthquake, floods or all together as per your requirements.

Also, you can choose whether to cover only the structure or the contents too.

 

 

WHAT TO COMPARE WHILE BUYING A PROPERTY INSURANCE?

Every individual, before buying a policy, must compare products across various insurance companies based on the following parameters.

1. Sum insured and premium – Sum insured is the maximum amount a policyholder can claim whereas a premium is the price he pays to receive insurance benefits.

Individuals must always look for the highest sum insured at the least possible premium.

However, though lower premiums should be preferred, the reason for the lower premium should not be ignored.

 

2. Claim settlement ratio – Claim settlement ratio indicates the percentage of claims that were honored out of all the claims an insurance company has received.

The higher claim settlement ratio depicts that either their policyholders are making genuine claims which are less likely to get rejected or the company is too generous in honoring those claims.

Hence, the insurance company with a higher claim settlement ratio should be preferred.

 

3. Solvency ratio – Solvency ratio indicates the financial health of the company. The company with a good solvency ratio is always stronger financially and would be in a much comfortable position to settle claims and not find reasons to reject claims.

Hence, one should not ignore this factor while comparing the products. As per IRDA, every life insurance provider must maintain the minimum solvency ratio of 1.5.

 

 

DO NOT OVERLOOK THESE PARAMETERS WHILE PURCHASING A PROPERTY INSURANCE PLAN?

The following are some of the important points that every insurance subscriber must consider while buying a PROPERTY INSURANCE PLAN.

1. Buy sufficient cover – Under insurance does no good to the policyholder than having no insurance at all. The total cover should be good enough to cover the minimum cost for the repair of a damaged house.

 

2. Check claim settlement ratio – Claim settlement ratio is the ratio of the number of claims received to the number of claims settled by the insurance company. Always choose the company with a higher claim settlement ratio.

 

3. Recheck policy form and plan details – Every policyholder is entitled to receive 14 days free lookup period to go through the original policy document.

The 14 days start from the day the policy document is received by the policyholder. The scanned copy of the application form is also enclosed in the policy document and it is the sole responsibility of the policyholder to go through every detail mentioned in the form and ensure it is filled correctly.

Any misreporting of any of the details mentioned in the policy form can lead to a rejection of the claim.

Also, the insured must check the plan details and benefits to ensure that it includes what was promised at the time of signing up. Any error or deviation should be immediately informed to the insurance company.

 

4. Take a quick look at fine prints – It may not be practically possible to read all the terms and conditions or fine prints of the policy however, it is advisable to take some time and quickly read through the highlights of various clauses and check important details of the policy.

 

5. Check to add on covers the policy offers – Insurance policies also have provisions for add on covers like floods, inundation etc. and other benefits that can widen the scope of coverage.

Policyholders must check and capitalize on all these benefits as per their requirements based on their requirements.

 

 

REASONS WHY YOUR INSURANCE CLAIMS CAN GET REJECTED

The following are some of the key reasons for rejection of insurance claims.

1. Withholding or falsifying critical information in the application form – Concealing critical information about the property like any past events, existing insurance policies, etc. while filling the application form can prove expensive at the time of filing the claim and may lead to rejection of the same.

A policyholder needs to ensure that every bit of information provided in the application form is correct.

Hence, they should avoid asking any 3^rd party to fill up the application form and fill it up themselves instead.

 

2. Failing to renew the policy on time – Every insurance company will give their policyholders a maximum of 30 days of the grace period if they fail to renew the policy by the due date.

If the policyholder still fails to act then the policy will get lapsed and any claim arising after that will be denied.

 

3. The event was excluded from the scope of coverage – The insurance contract mentions a list of certain exclusions. If the claim is filed for any of the event mentioned in the list of exclusions will not be honored by the insurance company.

 

4. Failing to follow due diligence – If the accident occurs as a result of irresponsible actions by the policyholder like not paying attention to the potential accidents, not turning the main electric switch and LPG gas knob off while going on long vacations, poorly maintained appliances and gadgets being used frequently, etc. can result in claim denial.

 

5. Causing delay in filing the claim – All claims are required to be filed within 7 to 15 days from the day the event has occurred. Any delay will call for unnecessary complications and justifications from the policyholder and there are slight chances that the claim can even get rejected.

 

 

LIST OF THE MOST COMMON EXCLUSIONS UNDER PROPERTY INSURANCE PLANS

The following is the list of some of the most common exclusions under the PROPERTY INSURANCE PLAN.

• Loss or damage caused by wear & tear and depreciation
• Loss of cash
• Loss or damage caused by war, invasion, act of foreign country
• Loss or damage caused by nuclear war
• Loss, destruction or damage caused to any electronic equipment due to over-running or excessive pressure
• Earth’s Movement: Damages occurred due to volcanic actions or erosion is in many cases not included.

Any pre-existing damages such as wear and tear of any other defect.