Photo: iStock
Photo: iStock

Home policy covers accidental damage

  • If the damage to the walls is due to plumbing issues, which occurred over time due to lack of maintenance, then such damages would not be covered
  • As per a thumb rule, the sum assured should be at least 10 times your annual income

What all does home insurance cover? The walls of a flat that I bought in 2001 have been completely ruined due to a severe drainage problem from the floors above. I am now paying nearly 2 lakh to fix it. I want to insure my second flat against any possible drainage or plumbing or electrical problems. Is it possible to do so?

—Girish Anand

There are two kinds of home insurance policies available today. One is the standard fire and special perils policy that covers 12 mentioned perils. This includes fire, flood, inundation, impact damage due to a third party vehicle, bursting of water tanks, and leakage from automatic sprinkler installations. Coverage could be further enhanced to include add-ons such as an earthquake and forest fire. Another policy is an all-risk policy, which covers the above perils and other unforeseen damages. An all-risk policy has just a few named exclusions, including pre-existing damage, collapse and war.

If the damage to the walls of the home is due to plumbing issues, which occurred over time due to lack of maintenance, then such damages would not be covered. Such damages are classified as gradual damages. However, any sudden and accidental damage would be covered by the policy.

I want to buy a term plan. How should I determine the sum assured? What are some of the parameters I should look at before zeroing in on the plan? Please suggest three-four plans that I can look at and compare.

—Shailendra Gupta

As per a thumb rule, the sum assured should be at least 10 times your annual income. This should be further enhanced for known financial liabilities such as a home loan. Shortlist the insurers with more than 90% claim settlement ratio. Within these, identify the ones with lower premiums. A few plans offer an in-built terminal illness coverage. This helps in accelerated claim payout in case the insured is diagnosed with a terminal illness. Mint’s ready reckoner for term plan premiums (see Term Plan Premiums) will provide you with the claim settlement ratio and indicative premium across insurers.

Abhishek Bondia is principal officer and MD, SecureNow.in. Queries at mintmoney@livemint.com

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