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How critical is home insurance?

BankBazaar | 20 Sep, 2011  | Follow Author | Add to my Favourites 

Are we personally capable to financially withstand if our property were to be hit by a Tsunami like Japan? The Recent Japanese earthquake & Tsunami loss is estimated at $309 billion. The numbers would be mind boggling if we convert to Indian currency!

The dream of the average lower or middle class people in India is to own a house with probably an area of 1000 sq ft costing at least 15 lacs. Most people borrow a loan to help fund their dream. What if this dream home is destroyed due to a natural disaster? Who can we blame for this unexpected happening? Though the government will support with relief fund but will this fund help us to rebuild the same house which we had? Or can you save Rs 15 Lakh in cash to rebuild the house?

The basic five elements of nature – earth, air, fire, water and space along with the various forces of nature, can create any sort of disturbance in this universe. This disturbance may be once in thousand years, this day may be today or tomorrow or a week later. But it’s very much unexpected. This means Tsunami in Japan last month could occur anywhere this month. Are we prepared to withstand this loss financially? Naturally we may not be prepared because the impact or cost of any natural disaster may be abnormally high. But on a personal front we do have some recourse.

The solution is to insure the Home under standard fire and special perils policy given by almost all General Insurance companies. It could be good thing to do so when you apply for a home loan as there maybe some benefits attached to it.

Fire and Special Peril Policies provide protection against damages/fortuities triggered by the following perils:


a)    Fire – Excluding destruction or damage caused to the property insured by

- Its own fermentation, natural heating or spontaneous combustion.

- Its undergoing any heating or drying process.

b)    Lightning

c)    Explosion/Implosion

d)    Excluding destruction or damage caused to the boilers (other than domestic boilers),  by its own explosion/implosion

e)    Aircraft Damage

f)    Destruction or damage caused by Aircraft, other aerial or space devices and articles dropped there from excluding those caused by pressure waves

g)    Riot, Strike, Malicious and Terrorism Damage

h)    Loss of or visible physical damage or destruction by external violent means directly caused to the property insured

i)     Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation

j)     Impact Damage

k)    Impact by any Rail/Road vehicle or animal by direct contact

l)     Subsidence and Landslide including Rock slide

m)  Bursting and/or overflowing of Water tanks, Apparatus and Pipes

n)    Missile Testing operations

o)    Leakage from Automatic Sprinkler Installations

p)    Bush Fires


The above mentioned covers are more than sufficient for any house building. This covers all natural disasters and any kind of fire occurrences. The fire can be of any sort. For example cooking cylinder bursting is also covered

But not everything is covered!

a)    5% of each and every claim resulting from the operation of Lightning. STFI (Storm, Tempest, Flood and Inundation) and Subsidence & Landslide including Rockslide covered under this Policy

b)    Loss, destruction or damage caused by war

c)    Loss, destruction or damage directly or indirectly caused to the property insured by nuclear forms

d)    Loss, destruction or damage caused to the insured property by pollution or contamination

e)    Loss, destruction or damage to bullion or unset precious stones, any curios or works of art for small amount exceeding Rs.10000/-, manuscripts, plans, etc.

f)    Loss, destruction or damage to the stocks in Cold Storage premises caused by change of temperature

g)    Loss, destruction or damage to any electrical and/or electronic machine, apparatus, fixture or fitting (excluding fans and electrical wiring in dwellings) arising from or occasioned by over running, excessive pressure, short circuiting, arcing, self-heating, or leakage of electricity, from whatever cause (lightning included)

h)    Expenses necessarily, incurred on

i)     Architects, Surveyors and Consulting Engineer’ Fees and

j)     Debris Removal by the Insured following a loss, destruction or damage to the property

k)    Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or damage of any kind or description whatsoever

The Exciting news!

Premium – Surprisingly the premium for this product is 0.06% + Service Tax. This means per lakh you may have to pay Rs 67 per annum. What’s even more interesting is that one can avail a 50% discount on premium if one wishes to insure his/her house for 10 years by paying the premium upfront.

Valuation of the Building – It is advisable to take the valuation at the prevailing market price.

So the next time you hear of natural calamities destroying houses or wiping out villages, you can rest assured that your family can overcome the financial burden caused if god forbid such a thing occurs to you. All that you would need is to spend a few hundreds to get covered and get peace of mind too!

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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