Thane building collapsed: How to insure your house against natural disasters

Everyone knows about the parable of the wise builder and the foolish builder. One built his house on the rock and the other on sand. When the rains came, the streams rose, and the winds blew and beat against the house, the former house stood but the later collapsed. This shows two things. One, the location of your house matters (low risk/ high risk area for possible natural disasters), and second, natural disaster could happen any time, anywhere.

[caption id=“attachment_884209” align=“alignright” width=“380”]  People looking at the debris after a three- storey building collapsed at Mahim in Munbai on Tuesday. PTI[/caption]

Why house insurance: Just take a look at news headlines to know the fury of this year’s monsoon on man and his property. You can’t do anything to stop natural disasters, but one way to mitigate the loss caused due to such disasters is buy a house insurance. Pankaj Mathpal, Mumbai based Certified Financial Planner says, “House insurance is a very important need and many are unaware of this. Generally, there are two types of house insurance policies. First being building insurance and the second being content insurance.”

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Type 1: Building insurance provides a cover to building or the structure of the building. The cover is to the extent of the entire cost of reconstruction of the building. This covers damage caused due to both man as well as natural disasters. Mathpal says, “The insurance is not for the value of the house, but reconstruction of the house. This means that the premiums are very reasonable.” These days many housing societies already buy this type of insurance and collect the cost of premiums via the maintenance charges. But, not everyone stays in buildings, if you have your own house, buying such a policy makes sense. Generally, this insurance is valid for a range of disasters such as storms, floods, earthquakes, fire, landslides, even damage due to riots and aircraft to name a few. And, remember like every insurance policy, this too comes with some conditions which apply.

Type 2: Content insurance: As the name suggests, this insurance covers the valuable items like gold ornaments, electronic goods, furniture, painting and the like. You can pretty much buy insurance for any content in your house. Mathpal says, “It’s best to absorb risk for some items in the house. And keep gold ornaments and the like in bank lockers. But some very valuable items may need to be insured.” The items are insured against loss or damages due to storm, fire, explosion, and the like. So contents insurance policies also cover third party damage. So, for instance, if for some reason you TV falls out of the window, over a car parked under your house? Mathpal says, “The insurance would also cover the car. Another thing to keep in mind that even though the insurance covers theft, it does not cover theft committed by present or past domestic help.” Again, do read the find print to know the basic inclusions, exclusions and the conditions which apply.

You could get one of the two polices or both the policies. These days many insurers provide a packaged policy which cover both types. Of course, the finer details on the polices vary from insurer to insurer.

**Cost:**As mentioned earlier, the cost is economical and won’t dig a big hole in your pocket. The building insurance premium is in the range of Rs 300 to Rs 3,500. Here, the premiums largely depend on the construction cost Rs/sq feet.The content insurance premium is also in the same range. The package policies (building cum content) have an average of Rs 7,500.

Few things to keep in mind: Understand the finer detail of you policy. May be get in touch with your financial advisor for the same. If you choose a long term policy the premiums amount can be decreased substantially. This is without a doubt a policy which you should consider buying, after all you must insure your biggest investment, your house.