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Your house and car are valuable. Be smart while insuring them

LiveMint logoLiveMint 03-04-2017 eepti Bhaskaran

As far as insurance is concerned, your money box is not complete if you don’t have home insurance or a comprehensive car insurance policy. Although car insurance for a new car is usually bought with the car, there are smart ways of bringing home a good policy. Read on for tips on buying home and car insurance policies.

A householder’s package policy bundles the basic fire insurance along with other covers. Fire insurance covers the structure of the house and its contents from fire and allied perils like lightening, storm and cyclones.

“Perils like earthquake are not included and you need to pay extra, so make sure you include that and other types of natural catastrophes as well,” said Sanjay Datta, chief, underwriting and claims, ICICI Lombard General Insurance Co. Ltd.

Additionally, the packaged policy also insures the contents against burglary, and electrical and mechanical breakdown.

“Buy the policy on a reinstatement basis, which, in the case of the structure of the house, pays for the cost of reconstruction and pays the full amount for the contents without deducting any depreciation,” added Datta.

If you live in a flat and in a housing society, then get the society to insure the structure of the entire building, instead of a stand-alone policy, said Deepak Yohannan, founder and chief executive officer, Myinsuranceclub.com. “What gets paid is the cost of construction. This is pointless for a flat owner who cannot construct the house if others don’t,” he explained. You can also look for a policy based on an ‘agreed value’ for flat dwellers. Agreed value factors in the cost of the area as well. So, in the event of a loss, if you choose to take the agreed value then the ownership of your house is transferred to the insurer. You can then take the amount and buy a new house, instead of waiting to reconstruct the older house.

Home insurance can also be bought online. According to M. Ravichandran, president, insurance, Tata AIG General Insurance Co. Ltd, it’s important to go through the add-ons and buy what’s needed.

“Don’t get bogged down by listing every item in the house. Machinery and electronics come with a warranty and can be repaired if under annual maintenance. Insure the big-ticket purchases and valuables and make sure you buy add-on covers such as public liability and rental accommodation covers for the period that the house is getting repaired,” Ravichandran added.

Due to the mandatory nature of car insurance, everyone buys insurance while buying a new car.

As per the law, insurance for third-party liability is mandatory for all plying cars. However, what you typically buy at the car dealership is a comprehensive policy, which contains a cover for own damage as well. This insures your car for damages and theft too.

But don’t blindly settle for what the dealer offers you. Shop around for a better rate or a better deal. Then look at the add-on covers.

“Add-on covers—such as return of invoice—pay the entire value of the car without depreciation and are recommended for new and expensive cars. Engine protect or even zero depreciation covers should be looked at,” added Ravichandran. Read more about add-on covers here: bit.ly/2o2PDvH.

You can also reduce the premium outgo by transferring your no-claim bonus from the previous car when you go to buy a new car. Here is how you can do it: bit.ly/2nzqHQ7.

Lastly, according to Yohannan, make sure when you renew your car insurance policy, and don’t compromise on the insured declared value (IDV). This is the value that the insurer will pay if your car is completely damaged or stolen. It is calculated based on the invoice of your car minus depreciation.

“Even as the IDV is fixed, depending on the make, model and age of the car, insurers allow policyholders to decrease the IDV by 10-15% in order to lower the premium. But this is not advisable because at the time of claim it can set you back much more than what you gain by reducing your premium outgo,” added Yohannan.

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