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Cyclone Vardah Forces You To Take Home Insurance

    Mr. C.S. Sudheer | Wednesday, December 14,2016, 07:38 PM
 

Cyclone Vardah has hit Chennai, leaving behind a trail of destruction. It has torn through houses and uprooted trees. Sadly…10 people have lost their lives. More than 12,000 trees have been uprooted. The city has witnessed very heavy rains and powerful winds. Roads have been blocked by fallen trees, causing traffic jams in the city. Rail and air travel has been severely hit.

More than 15,000 people in Chennai have been evacuated from low lying areas into relief camps. The Government is providing people with food, water and medical services in these camps. What happens to the poor citizens of Chennai? Their properties and houses have been destroyed by falling trees and powerful winds.

Now to the big question? Have the citizens of Chennai availed home insurance? Just last year, Chennai was hit by severe floods. Buildings and cars were submerged….houses destroyed….You can read about the Chennai floods here. So what is home insurance? Why is it so important? Read more to find out.

What is home insurance?

A life lost can never be replaced. But your house can be rebuilt. The problem…rebuilding your home costs a lot of money. Rebuilding your home spending lakhs of rupees is not a joke. This is why you need home insurance.

A basic home insurance plan, protects the structure of your home from fire, lightening, storms and yes…floods. If you pay a slightly higher premium, your home gets protection, even from an earthquake. You can also opt for a householders package policy, where not only is the structure of your house protected, the contents of your home are protected from burglary, damage and mechanical/electrical breakdown.

You need to pay a home insurance premium and insure your home. The amount for which you insure your home, is called the sum assured. Most home insurance plans compensate you for rebuilding the structure of your home and exclude land cost. Here’s the good part…A home insurance plan is very cheap. Your home costs lakhs or even a crore….Your householders package policy…just a couple of thousands a year.

Householders package plan = Protect the structure of home + Protect the contents of home

Why home insurance?

Remember the floods in Jammu Kashmir and landslides in Uttarakhand? The devastating floods in Chennai last year. An earthquake in Delhi, the cyclone Nada which hit Puducherry…Now cyclone Vardah devastates Chennai and parts of Andhra Pradesh…Natural calamities seem to be hitting various parts of the country, regularly. Natural calamities are no longer rare.

Yet, you and several of our citizens, do not care to avail home insurance. Many of our citizens do not know about home insurance. Many are reluctant to purchase home insurance and consider it a waste of money. Home insurance is not widely promoted by the Insurance Industry in India. Less than 1% of the industry premium comes from home insurance.

Can you afford to neglect home insurance? Just take a look at the devastation caused by Cyclone Vardah…Imagine if your house worth lakhs of rupees is destroyed and you suffer heavy losses rebuilding it, just because you didn’t care to avail a home insurance plan costing less than INR 2000 a year?

We at IndianMoney.com help you pick the right insurance plan. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.

How does home insurance settle your claim?

Let’s say you want to insure your 5 year old house, which has an area of 1,000 square feet. The cost of your house depending on the locality is INR 4,000 per square foot. The value of your house is INR 40 Lakhs (1000*4000). If your house is destroyed in a flood, will the insurer pay you INR 40 Lakhs?

No…The insurer pays you only to rebuild the structure of your home. Let’s say the cost of construction of your home is INR 2,000 per square foot. You multiply the cost of construction * the area of your home. This is INR 20 Lakhs (2000*1000).

You opt for reinstatement basis:

The sum assured = area of the house * cost of construction. Your sum insured is INR 20 Lakhs (1000* 2000). You get this amount to rebuild your house.

You opt for market value basis:

You get cost of construction minus depreciation.

If depreciation is 20%, you get:

Total cost of construction – depreciation. This is INR 20 Lakhs – INR 20 Lakhs@20% = INR 16 Lakhs.

Yes…today cyclone Vardah is causing widespread destruction in Chennai. Tomorrow it’s some other natural calamity, in another part of the country. Earthquakes, floods, landslides… Any natural calamity can destroy your home. It’s time to avail home insurance and save your home from Acts of God. Be Wise, Get Rich.

Mr. C.S. Sudheer

Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.

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