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Property Insurance: Be Insured, Be Informed

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Published on September 8, 2021. EST READ TIME: 3 minutes

Property insurance is, regrettably, an often-overlooked aspect for safeguarding your investment. The main purpose served by property insurance is to offer protection against accidental or natural damages and other losses to your property. It can also include coverage for any liability or mishap that may happen to others while on your premises. Let us examine some of the important ‘Dos’ and ‘Don’ts’ while getting your property insured.

Do's of Property Insurance

Property insurance is a rather diverse category, the categorization of which depends upon the type of cover being sought and the type of property being insured. However, some common good practices to be followed, regardless of the type, are:

Choose the Right Policy

This is a very important first step which involves a proper assessment of the purpose of the insurance and likely threats that you need safeguarding from. The weather conditions and geographical location can play an important part in this process. At the end of this step you should be able to figure out if you are looking for insurance for structural damages, loss of goods and material or both. Based on the nature of the property and the type of cover you can either opt for specific policies like Flood Insurance, Fire Insurance or get a comprehensive package which has most aspects already covered within it. It is also important to understand the riders, inclusions and exclusions to avoid any surprises during the time of raising a claim.

Understand the Basis of Fixing Sum Insured

Sum Insured can be fixed using different methods for different types of coverage. In the case of damage to property, this is usually based on reinstatement value. This is quite different from the market value of the property. It is actually the cost of a new/rebuilt equivalent property without factoring any deduction for depreciation. On the other hand, in the case of coverage for possessions and goods, the respective market value is used. Some providers may use market value and take into account a certain amount of depreciation.

There are other ways as well, for fixing the sum insured for machinery, factories etc. Since your final claim is dependent on them, it is important to be crystal clear regarding the basis being used by your insurance provider.

Keep Ownership/Rental Documents Handy

Be very careful while filling in the information details. Minor mistakes are known to lead to claim rejections and associated hassles so do ensure accuracy of the information. The ownership documents or rental agreement of the insured property should always be kept handy as they are important documentary evidence while applying for the insurance and also for raising claims later on.

Don'ts for Property Insurance

Here are some of the actions which you should consciously avoid, while signing up for property insurance.

Don't Pick Additional Cover Randomly

Most comprehensive policies consider several prevalent and likely risks while providing coverage. There may be other add-ons and top ups on offer as well. It is important to not get carried away and consider the intended purpose of buying the insurance. Do not forget that lesser-required additional coverage is bound to raise the overall premium as well.

Don't provide misleading information

Claims underwriting, disbursal and auditing is a very strict business with several regulatory and legal connotations involved. Deliberately or accidentally providing false information regarding yourself or your property may get you the coverage you require initially; but can have severe ramifications later on, including legal action for fraudulent activity.

Don't assume everything is covered

Read the policy documents carefully to clearly understand the inclusions and exclusions. In case required you may opt to get add-ons or separate specific policy for risks which are important for you but not covered in the original policy. Also, pay attention to the payout amount ceiling or percentages, if applicable.

Conclusion

While buying property insurance, it is necessary to assess likely threats and then choose the right type of coverage for your property. Comprehensive policies are usually recommended due to the variety of possible losses they take into account, however, it is vital to read the documents carefully and understand all terms and conditions involved therein.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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