If you move to Delhi from a perennially warm coastal city, chances are that in winter, you'll be warned about grease freezing in kitchen pipes. "Always remember to pour hot water down the kitchen sink every night," warns a friendly landlord. But what if you don't remember and the grease freezes in the pipes, clogging them, and you end up with burst water pipes? You'll most probably need to look for a new house and your landlord will be several thousands of rupees poorer. Unless he was smart and had shopped around for a home insurance policy that covered burst water pipes.
Every house owner needs home insurance, but very few bother to take it. This is because few of us believe that our homes will be damaged or destroyed by flood or fire, never mind missile attacks or earthquakes. But accidents like burst water pipes, overflowing water tanks and busted sprinkler systems can take place in any home. Home owners belonging to the old school of thought might scoff at the idea of insurance covering damage caused by such accidents, but there are policies specifically designed for these.
The standard home insurance policy generally covers the structure and contents of a house against perils like floods, riots, earthquakes, theft, etc. These policies cover the cost of construction, not the market value of the house. Does this mean that you cannot take a home insurance policy if you live in an apartment block? If it is not possible to rebuild (as in the case of an apartment block collapsing), the insurance company deducts a depreciation amount of 2 per cent a year and the owner gets the rest.
The trick to buying a good home insurance policy is to pick and choose the right combination of risks. Ensure that the policy covers fire, theft and damage to electronic equipment. Anything more than these may be a waste of money. Consider other heads only if you have specific needs. For instance, if you live in a rented house, there's no need to insure the structure. You should insure the contents and electronic equipment, especially geysers and air conditioners, which are particularly susceptible to voltage fluctuations.
For insuring electronic gadgets, there is a huge depreciation that must be factored in. There is also the possibility of the model being discontinued, making spares and repair expensive. So insure the gadget for its replacement value, which means that the insurer will compensate you for the cost of replacing the product. For instance, an LCD television that you buy today for Rs 60,000 could be worth less than Rs 45,000 after five years. If you have insured the gadget for its market value, you will only get Rs 45,000 as claim. However, if you have covered it for its replacement value, you will be entitled to Rs 60,000 in your claim.
If you want adequate coverage, you'll have to shop around. For instance, should you look at a policy that pays you enough to cover the rent of alternative accommodation while repairs are going on? Would you rather opt for several different heads and take cover you don't need because you're offered a hefty discount on the premium? Should you consider a policy that covers the fees charged by the architect, surveyor and consulting engineer? What about debris removal or damage caused by aircraft or missile testing operations? Ask your insurance agent specific questions, do your homework thoroughly, and you can rest easy that you can build your home again, no matter what.
