Basis for settling claims
The basis on which an insurer settles a claim depends on the coverage purchased and the policy wording. Many property insurance policies settle building claims on a reinstatement value basis.
“Reinstatement value seeks to cover the reasonable cost of repairing, reconstructing or reinstating the damaged insured property with property of similar kind and capacity, subject to the sum insured and policy terms,” says Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI).
If the policy provides for settlement on a market value basis, the insurer may apply depreciation to determine the admissible loss.
Check what policy covers
A home insurance policy may cover the building, household contents, or both. A building-only policy will not cover damage to household contents, and vice-versa.
“When both building and contents have been insured, an admissible loss to both may be considered subject to their respective sums insured and policy conditions,” says Bharindwal.
The policy may also cover electrical fittings, furniture and appliances, depending on the cover the policyholder opted for. “Fixtures and fittings forming part of the building may be considered within building coverage depending on the policy definition. Furniture, appliances and other movable household items would generally fall within the insured contents,” says Bharindwal.
The insurer may not pay for losses caused purely by wear and tear, gradual deterioration, inherent defects, or mechanical or electrical breakdown unless the policy expressly provides such coverage.
Insure valuables separately
Policyholders need to declare and have valuable items valued separately when they buy the policy. Satisfactory evidence of ownership and value may be required for a claim involving such an item.
Jewellery, precious metals, works of art, collectables and other high-value articles are subject to sub-limits. “A claim for a valuable item may be considered only up to the applicable policy limit,” says Bharindwal.
Declare separate structures
Policyholders should declare structures that are separate from the main building, such as compound walls, garages and sheds, when they buy the insurance.
“A policyholder may face difficulty getting a claim paid for a structure that was not specified in the policy,” says Kapil Mehta, co-founder, SecureNow Insurance Broker.
Basements need particular attention because they are often the first areas to be affected by flooding. “Basements are generally excluded unless they have been declared to the insurer upfront,” says Mehta.
The insurer may also not pay a claim if the insured home remains unoccupied for a specified period, such as 30 days, without the insurer being informed.
Home insurance covers direct loss caused by flooding, not damage that occurs subsequently. “Consequential losses arising from flooding, such as mould or fungus, are often not covered,” says Mehta.
Damage may also not qualify for cover if water remains stagnant for a few days. “The inflow of water should be sudden for the resulting damage to qualify for cover,” says Mehta.
Sub-limits cap the maximum amount an insurer reimburses for specific categories even when the overall sum insured is much higher. Policyholders should review the policy’s schedule of coverage, especially the limits applicable to valuables.
“Jewellery, for example, may be covered only up to ₹5 lakh, ₹10 lakh or ₹15 lakh. Policies may also impose a limit on the amount payable for a single valuable item,” says Ashwini Dubey, business head, home insurance, Policybazaar.
Insurers may also cap certain ancillary expenses. They may cap the cost of removing debris after a loss at around 2 per cent of the total sum insured. They may also impose relatively small caps on architect, engineer and surveyor’s fees.
“If belongings exceed standard limits, speak to the insurer or broker about purchasing all-risk add-on cover to protect those assets,” says Shilpa Arora, co-founder and chief operating officer, Insurance Samadhan.
Temporary accommodation cover
Many policies provide cover for temporary alternative accommodation if the insured building becomes unfit for occupation. Insurers generally offer this benefit through an add-on.
“The insured can receive rent for staying in a similar house in a nearby area,” says Dubey.
The amount and duration depend on the limit selected by the policyholder. The period of cover for alternative accommodation can range from six months to three years.
A home insurance policy may also cover loss of rent suffered by a landlord if a rented house becomes uninhabitable.
Act quickly after flooding
Policyholders should inform the insurer promptly after a loss. They should also take reasonable steps to prevent further damage, including switching off electricity and gas where possible.
Policyholders should document the damage thoroughly through photographs and videos. They should ideally do this immediately because a surveyor may reach the location only after a delay of around 24 hours during a major flood.
“Clear, wide-angle photographs and videos should be taken of the damage,” says Arora.
Policyholders should photograph soaked carpets, structural damage and high-value items. Such evidence can help with the claim and its settlement. Policyholders should preserve whatever documents they can salvage after the flood, including invoices, valuations and other supporting records.
Avoiding claim rejection
A policyholder’s actions when buying the policy has an effect on whether the insurer accepts a claim. “The disclosures made then should be correct and adequate,” says Dubey.
Policyholders should also buy home insurance in the name of the person who owns the property. “Problems can arise if a family property is registered in a parent’s name but the policy is bought in a son or daughter’s name,” says Dubey.
Policyholders should declare any modification made to the insured house after purchasing the policy. “Any additional premium required because of a modification should be paid,” says Dubey.
Notify the insurer as soon as the incident occurs. “Delaying the claim is one of the most common reasons for rejection,” says Arora.
Policyholders should prepare a detailed inventory of affected items. “Damaged items should ideally not be disposed of before the surveyor has assessed them and the insurer has given approval,” says Dubey. Retaining damaged items helps establish their salvage value.
Also take written permission from the insurance company before carrying out major or permanent repairs.
Policyholders should not switch on flood-affected electrical appliances such as refrigerators and washing machines after waterlogging.
Finally, policyholders should avoid false statements, inflated losses or misrepresentation of the cause of damage, as these can result in claim rejection.
