Reader's Corner: General Insurance

What is the maximum tenure that can be chosen for a home insurance policy for a housing loan?

I am planning to take a householder policy that will also cover valuables such as gold and jewellery. I do not have the bills for these. I will get valuation done and submit it to the insurer. I wish to know whether insurers have tie-ups with valuers. How much do valuers typically charge, and how are their fees structured? 

Normally, the valuation can be done by any reputed jeweller. He will do the valuation based on the current market price of the ornaments. The fee is typically a percentage of the total assessed value, and has to be borne by the insured. If the value of the jewellery is very high, you can negotiate the fee. There is a rule of thumb that you should take at least 10 per cent higher value of sum insured, compared to the assessed value, when purchasing insurance. This will help you take care of future price appreciation. Also, insurance companies do not have any tie-ups with valuers. 

I want to buy a home insurance policy for a housing loan. What is the maximum tenure that I can choose for the policy? My loan is for 25 years.

Generally, the duration of a general insurance policy is one year. However, a relaxation has been provided for a policy covering a residential building. Such a building can be covered for the long term also, irrespective of whether there is a loan on the property. In case there is a loan, the institution providing the loan usually insists that the policy tenure should coincide with the loan period.

I am planning a destination wedding in Goa. The wedding planner is suggesting that I should buy an insurance cover. Can you help me understand what is covered by such an insurance plan, and the exclusions in it?

A wedding insurance plan covers cancellation of the wedding event due to storm/tempest, act of God perils, loss or damage to the venue due to fire and allied perils, and bride, groom and blood relatives' (which would include parents, brothers, and sisters of the bride or the groom) death or accident. Since it is a specialised package cover, it also covers things like burglary (at the home of the insured), public liability (or third-party liability), and personal accident cover for the bride, groom and their blood relatives.

Each cover under the policy may have separate exclusions. For instance, cancellation of the wedding due to reasons other than the perils mentioned above, due to pre-existing conditions and circumstances known to the insured at the inception of the cover, will be excluded. It will also exclude cancellation due to expected or seasonal rains, storm, sandstorm, high winds, and tempest. Cancellation due to family disputes will also not be covered. To understand the policy coverage and exclusions in detail, read the policy wordings carefully.

We are a family of three. My son is 22. We have a family floater policy. But now that he is getting married, we want to include our daughter-in-law as well in the policy. How should we go about doing so? By how much should we increase the coverage? Should we purchase additional top-up plans? Will it be advisable to buy two separate covers instead?

Yes, you will need to have two separate policies - one for your spouse and you, and the other for your son and daughter-in-law. If your son pays for his policy, then he can also begin to avail of Section 80D benefit. Both the policies should have a floater sum insured of Rs 1 million each. You may also purchase additional top-up plans if you wish to enhance the sum insured.

Alternatively, if your policy allows coverage of non-dependent children and of the daughter-in-law, then you may include her in the same policy. In that case, the sum insured of the single floater policy should be Rs 2 million. Only the proposer or the person who pays the policy premium will be able to avail of Section 80D benefit.

My wife and I have health insurance coverage of Rs 500,000 each, while my son has health insurance coverage of Rs 1million. Now he plans to go abroad for studies. We have already purchased another policy for him, as required by the foreign university. Can we move his cover to ourselves? If so, how can we change the coverage? What would be the tax implications? My wife is 55 and I am 59.

As your wife and you are covered for Rs 500,000 each, you will be eligible for this sum insured only, unless you get it enhanced at the time of renewal. You will not be able to use your son's sum insured for yourself. I suggest that you continue renewing your son's policy too, so that he remains covered whenever he comes back to India.

As for the query on income tax, you were allowed to claim a deduction of up to Rs 25,000 in each financial year, for the medical insurance premium that you pay. The premium should be for your spouse, dependent children, and you. At the time of renewal, if your spouse and you have turned 60 or more, then the amount of deduction you can avail of goes up to Rs 30,000.

My husband is retired and doesn't get pension. But he has invested some money in the Senior Citizens Saving Scheme. Both of us have health insurance covers for Rs 300,000 each. Is this much health insurance cover sufficient?

A health insurance cover of Rs 300,000 may prove insufficient. We suggest that you enhance it to a minimum of Rs 500,000, depending on how much premium you can afford.

I have heard a lot about telematics. What is it and can it help to bring down car insurance premiums? How will it do so? Are telematics-based policies available? If not, by when can we expect them to become available?

At present, insurance premiums for personal insurance products like motor and health are calculated based on general parameters. For instance, premium rates for cars depend on the make and model of the car, its engine capacity, the geography in which it plies, fuel consumption, etc. 

Telematics refers to the integrated use of communications and information technology to transmit, store and receive information from telecommunication devices to remote objects over a network. This technology is effectively used in the field of logistics to monitor the movement of cargo. Telematics has now become a popular tool with insurers for monitoring the driving patterns of customers. With this, insurers are in a position to assess the driving behaviour of the customer and can rate him accordingly. As a result, they can modify the premium rates arrived at by applying the general parameters, duly factoring in the customer's driving scores. As a result, the rates charged for automobiles become more realistic, fair and equitable. More importantly, the rationale for premium computation become person specific, and not vehicle specific, as is the case now. A good driver stands to get a better rate.

Similarly, health premiums are generally based on the age of the customer, past history of his illness, surgery undergone, present health condition, etc. Telematics in the form of wearables will help to capture the customer's life style in terms of his fitness practices and add this relevant dimension to the computation of his health premium. As with motor premium, telematics helps to make the rating person specific.

More importantly, this enables insurers to monitor the quality of risk they are exposed to continuously. They can take corrective measures as warranted, unlike in the past when the insurer ceased to have any oversight of the risk once accepted. 

The writer is MD and CEO, Future Generali India Insurance Company. Send your queries to yourmoney@bsmail.in