Insurers are particular about a few criteria when providing a cover.
After her father's demise a year ago, Sumati Upadhyay decided to insure her ancestral home in Allahabad, as there was no one to look after it back there. She was looking to insure the building and its contents with a comprehensive householder's plan.
"To my surprise, the insurance company rejected my application because the property was more than 40 years old," recalls the software professional.
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Tapan Singhel, chief marketing officer of Bajaj Allianz General Insurance, explains the age and condition of a premises matter at the time of insuring a property, because, under standard fire policies, there are two options, to insure a property either on the basis of reinstatement value or market value. "If the house is more than 10 years old, then it cannot be covered on reinstatement basis. While the cover given on the basis of market value is provided depending on the reconstruction cost," he says.
The insurance company, whom Upadhyay had approached, gave an option to redevelop her house. In which case, she could get a cover on the redevelopment value of the house. As she didn't plan to do so, she was denied a cover.
Even the area and location of the property are considered, and they affect the sum insured of the home insurance cover, because it is decided on the basis of reconstruction of the property in the specific region. But, this is applicable only when insuring a building or structure like a standalone house or a bungalow.
There are two types of home insurance covers. One that covers only the structure or buildings, meant for those who own standalone houses. Then, you can also cover only the contents of your house. Those staying in housing societies opt for it, as the society insures the building. Or, you could buy both the covers, this would be called a comprehensive home insurance.
Those who have other, unoccupied properties or holiday/farm houses, should make sure these are occupied for at least 30 days. If Upadhyay had got a householder's plan, and had to make a claim, it could have been rejected, as she goes to Allahabad once every year, only for two weeks. She had to make sure the property was occupied for at least 30 days, for her to be able to make a claim, if any.
Many a times, the householder's policy can even lapse in such circumstances. "There are some policies, these days, which come without this clause. That's why we advise customers to compare several policies before zeroing down on one," says a broker.
Disappointment lay further in store for her when Upadhyay's request for insuring the contents of her ancestral home was turned down. These plans do not cover electronic items that are over 8 to 10 years old. Reason: There is a value attached to electronic items, which nullifies if the item turns over eight years old.
Deepak Yohannan of MyInsuranceclub.com says, "A nine year old computer would fetch close to nothing on resale, so will an old music system. That's why insurers do not cover these. The depreciation in electronics is much higher in comparison to cars."
Many insurers like Bajaj Allianz General Insurance would not prefer to cover valuables, bullion, old paintings, precious jewellery or heirlooms, which are not covered under the standard fire policy as a preferred property. However, they can consider covering these, provided you give a valuation report from a reputed valuer.
Also, many with second homes may use the property or rent it for commercial purposes like coaching classes, consultancy or counselling. Claims for such properties will not be honoured, because the cover is provided for residential premises. You need to cover such premises as commercial, if you intend to profit from them. Insurers do not cover damages to a property resulting out of natural wear and tear. Or, even the loss caused by the domestic help's involvement in burglary.
Last, if securities or bond certificates are consumed in fire, the house cover will not compensate for it, because this doesn't come under monetary loss and duplicate copies can be generated. This is also applicable for deeds, manuscripts, business books, documents of any kind and promissory notes, unless explicitly mentioned to the contrary.
