Check your existing insurance to find out whether you are really covered for earthquake damage. Property –buyers should ask for earthquake cover and pay additional premium
The devastating earthquake in Nepal, which was the worst in the last 80 years has killed over 5,000 and damaged properties worth several hundred crores. There are chances of the deaths reaching 10,000 along with massive property loss. It is a wake-up call for Indians too who are lax about buying property insurance. When you apply for property loan, home insurance to cover the property structure becomes mandatory and the bank will often arm-twist you to buy from the insurance company of their choice. When you buy property from your own money, you should still buy property insurance, after finding a suitable product for your requirements.
Property insurance premium is affordable and hence you should not skip this important cover. The premium for Rs5 lakh cover for only fire and allied perils section would be Rs175 plus tax. However, are you aware that earthquake cover is an optional feature, which means it is available only if you opt for it? The add-on cover to include ‘Act of God’ or special perils can increase premium cost by 20%-30%. It is still worth the money considering the tremendous loss due to natural calamities. Section 1 of Government insurers is cover for “Fire”. It includes loss to the residential building, household goods and personal effects - as per Fire Policy + Earthquake Risk. The exclusions are loss to money, securities, livestock, motor vehicle and documents. The premium rate is Rs0.30 per thousand. Earthquake cover can be added by paying additional premium.
There are reports of government insurers National Insurance and Oriental Insurance having exposure in Nepal through branches, as do GIC Re in reinsurance. Bajaj Allianz General Insurance has announced a dedicated helpline number for the victims. A customer can, through this number, register a claim or seek other help. A team has been formed in the company to handle these cases. State-owned reinsurer GIC Re is the largest international reinsurer in the Nepal market and may have to bear the claims for the losses.
In reality, the claims from Nepal earthquake would be honoured only if the earthquake cover had been taken, while buying property insurance. It means the insurers may get away if the earthquake related losses are not covered. There is likely hood of premium hike post Nepal earthquake, considering the horrendous amount of property and home contents loss inflicted by the natural phenomenon. Moreover, the higher the earthquake risk for a location, the higher will be the property insurance premium.
Needless to say, Kathmandu will see a steep hike in premium for earthquake cover. The rates depend on the area and the frequency. The Indian Meteorological Department (IMD) has grouped India into four seismic zones, II, III, IV and V. In India, at least 38 Indian cities lie in high-risk seismic zones and nearly 60% of the sub-continental landmass is vulnerable to earthquakes. No Indian metropolis has witnessed a serious earthquake, although Delhi lies in high-risk Seismic Zone 4. Guwahati and Srinagar fall in what is called “very severe intensity zone”, or zone V, the highest-risk earthquake zone. Mumbai, Chennai and Kolkata lie in Zone 3.
Most insurers provide cover for the contents in a building that is not more than 50 years old. There are, however, insurance companies that have the upper limit at 25 years. In cities like Mumbai, people live in flats (apartments) within a building of several floors. When you take property loan, home insurance to cover the property structure becomes mandatory and the lender will ensure that earthquake cover is also included. However, some products may not offer earthquake cover for individual flats. For e.g. ICICI Lombard policy wordings specify “Extension cover shall be granted only if the entire property in one complex / compound / location covered under the policy is extended to cover this risk and the sum insured for this extension is identical to the sum insured against the risk covered under main policy except for the value of the plinth and foundations of the building(s)”. In the event of the insured claiming for loss or damage under this policy, she must (if so required by the company) prove that the loss or damage was occasioned by or through or in consequence of earthquake.
It is better to buy the cover to include both the structure and content. Home content cover is the other important component of insurance, which covers contents of the house, such as furniture, clothes, jewellery, appliances and electronic goods. You can also read Moneylife cover story on home contents insurance “Home Insurance: Are your valuables unprotected?”
. You will get insights into buying the right home contents cover to ensure that your valuables are adequately protected. You do not want to buy a product, which leaves you unprotected.