Home insurance products need to be revamped if insurers wish to energise sluggish sales, experts tell DNA.
It is as though Indian home-owners no longer wish to protect their property from burglary, fire or natural disasters. Make no mistake, home insurance products abound — you can choose to cover only the reconstruction cost of property, or opt for a comprehensive cover for all the contents of your house, or bundle up the jewellery cover with the householder policy — but there are not many takers. For the last few years, general insurance companies have been met with lukewarm demand. Evidently, all is not well with home insurance in India.
Few takers
Insurers expected an uptick in sales after the havoc wreaked by Japan’s earthquake last year. (They may yet continue nursing such hopes in the wake of the 8.7 Indonesia quake yesterday.) But the market has not found many takers so far.
Industry experts say lack of awareness is behind the low level of penetration of home insurance in India. But the cumbersome process of detailing each and every item, not to mention the long list of exclusions, is a big put-off for potential buyers. “Even though the premium structure of home insurance is low, a stand- alone home insurance product doesn’t have good demand.
Intermediaries are not keen to take this product to customers,” says Mukesh Kumar, a strategy planner at HDFC Ergo.
In response, some insurers like Cholamandalam have started providing a comprehensive policy that does not require consumers to prepare long lists of the contents. Instead, it provides a blanket cover. “If home insurance is bundled with other insurance products or home loans, it will have more takers,” says Kumar.
You need to pay…
Sum assured for home insurance is calculated on the basis of ‘reconstruction value’ (a term that indicates the cost of reconstructing a property in the event of a disaster or some catastrophic event; it is calculated by taking the value of the built-up area and the construction rate per square foot). Based on the reconstruction value, the sum assured for the structure can be easily calculated.
Sum assured for the durables is calculated according to the market value of the durables, after taking depreciation into account. The premium for insuring just the structure (excluding durables) is generally low and is typically 0.5% of the sum assured. For example, for a sum assured of Rs10 lakh, you need to pay a premium of Rs2,500-3,000. Under a comprehensive cover, for a sum assured of Rs1 crore, you need to shell out a premium of around Rs15,000 annually.
In order to keep your premium low
and earn a no-claim bonus, you should avoid making claims for small damages. If you continue to do this, then, in the corresponding year, you can earn a no- claim bonus of up to 15%. And if your property has a secured safety system in place, even that can help lower the premium. So, if you have a fire extinguisher, smoke detector and other such security system installed in your house, your premium can come down by up to 20%.
While opting for home insurance, you should try and avoid including unnecessary items in the covered list. Else, their inclusion will inflate the premium without offering corresponding benefits. Also, if you have added any expensive item in your house after buying the cover, then remember to add it to the list of contents at the time of policy renewal.
Watch out for…
Home insurance policies generally have a long list of exclusions. For instance, cash, bonds, documents, will not be covered. Also, if your office and house are at the same address, then watch out: home insurers will deny you a cover. A property that is used for other than residential purposes will not get a cover.
If a mishap occurs while you were away for a stretch of 30 days in a year, then the cover will cease to exist. And if your house is more than 15 years old, then you are most likely to be turned down by most insurers. If you want your precious art and paintings to be covered, then you will have to produce a valuation certificate from a reputed assessor.
“One should check whether he or she is adequately covered under such insurance. Also, keep an eye on the exclusions specified by each insurer. It is advisable to exclude small appliances, paintings and so on,”says KG Krishnamoorthy Rao, MD and CEO of Future Generali General Insurance.
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