Why third party damage cover is essential in your home insurance policy

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A fire recently broke out in the building where Deepika Padukone resides in Worli, Mumbai. Many neighbouring properties were also damaged. A home insurance cover comes handy in such circumstances. Most home insurance policies cover risks such as storm, cyclone, fire, explosion, riots, impact damage and malicious damages. But these policies also have their own limitations. It is necessary to understand what they cover and what they don't before you buy one.

A home insurance cover provides protection to both the structure of the house and the contents within it. "Every home should have a building and contents insurance in place. While the building insurance cover allows rebuilding of the damaged portions of the insured house, the contents cover helps in replacing damaged items such as furniture, fixtures and electronic appliances," says Nikhil Apte, chief product officer, Royal Sundaram General Insurance.

If a fire breaks out in your house, inform the insurance company at the earliest if you wish to file a claim. It is also advisable to take pictures of the damaged parts of the property as this helps in the claim process. Your insurer could also ask for additional documents, which you need to provide along with the claim form.

"Declare the construction value of your house and the value of the content you have within it while buying the policy. In case of damage to the structure of the house, you will need to submit a report made by an authorised architect to quantify the loss," says Tarun Mathur, chief business officer, General Insurance, Policybazaar.com.

If you get the damage repaired yourself after the incident, keep all the necessary bills and receipts as you will have to provide them to the insurance company for making a claim. If the damage is extensive, the insurer could appoint a surveyor to assess the damage. Once the claim is validated, the insurance company will reimburse you. 

If a fire in your house causes harm to your neighbour or any other third party, the insurance company will cover the damage to them too. Liability cover states that any bodily injury or damage caused to a third person on your premises or by you is liable to get cover. It also includes damages done to third-party property. "A home insurance policy also takes care of any legal liabilities in case of damage caused to a third person or property, on the insured's premises or by them," says Naval Goel, chief executive officer and founder, PolicyX.com. 

A few home insurance policies provide third-party cover only as an add-on cover. In such policies, a public liability add-on cover is needed to cover third-party injury or third-party property. Other add-ons offered with home insurance cover are employee's compensation cover (for injured drivers, cook or guard), temporary resettlement cover (cover for alternative accommodation and transport), ATM withdrawal robbery cover, loss of wallet and key cover.

"Neighbours can also sue the owner of the house from which the fire has emanated. In such a scenario, public liability cover under home insurance policy pays for the damages done to neighbouring houses," says Sasikumar Adidamu, chief technical officer, Bajaj Allianz General Insurance.

 
Premium rates for home insurance policies depend on a variety of factors like the type of construction, protection systems available, and claim history. The annual premium for a sum insured of Rs 5 million for the structure and Rs 1 million for the content of the house is around Rs 3,000-5,000.

The extent of compensation depends on whether the house is adequately insured. "Damage to the building as well as the common area is settled on either Market Value basis or Reinstatement Value Basis, which the insured selects at the time of buying the insurance cover," says Mahesh Balasubramanian, managing director and chief executive officer, Kotak General Insurance.

When a claim is settled on Market Value basis, the appointed surveyor assesses the claim by first calculating the cost of repairs and then applying a depreciation factor, depending on the age of the building. In case of settlement on Reinstatement Value basis, the claim is settled without adjusting the depreciation. 

Many people feel that ‘this will not happen to me’ and hence don't feel the need to buy a home insurance cover. Then one-day calamity does strike. Hence, do buy a cover in good time and be well protected. 


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