Home Insurance Is Both For Owners And Tenants: Tapan Singhel

I don't think the word ‘unpopular’ should be used here. If you look at the percentage of sale of these policies, it will offer a logical conclusion for somebody looking at it from outside. The issue is that if I look at insurance as a category, people are not excited about it. That's how the category has been across the world, for hundreds of years. But if we hold conversation and people listen to it, then I have seen people taking up insurance very well.

So, it is a conversational sale. Further, if you consider the cost, it is negligible. It is few thousand rupees to protect a home worth of lakhs. This amount is insignificant compared to the money you spend on building a home or on the contents that are there.

When I ask people how many years of savings go into building a house or acquiring all the contents in a home, the average response is 10 to 15 years. So, 10 to 15 years of your life savings can disappear overnight if things go wrong.

So, in my view, the issue is (lack of) conversations about home insurance, understanding what it is, its cost, and what all it protects.

Let us say you live in Louisiana or Florida in the US, where hurricanes, floods, and such disasters are common. Interestingly, in Louisiana, people cannot afford home insurance because it is too expensive. It’s a big problem there. As they are aware of the risks, they want home insurance because of the frequent occurrences of tornadoes and cyclones. So, in US, home insurance penetration is about 95 per cent which means 95 people out of every 100 have home insurance. In India, it is less than 1 per cent.  

But does India not have such scenarios? (Even in India) these have become very prevalent now. Floods are happening in many states. We have seen floods in the northeast part of the country, Sikkim, Uttarakhand, Chennai, and Bengaluru. We have still not forgotten the Mumbai floods in 2005. So, you are not sure about the way it triggers and the damage it creates, I think such conversations should reach out to more people to make them aware of the risks and the coverage.

Home insurance penetration is high in developed countries for a simple reason: you cannot afford to lose the kind of savings that go into building a home and its contents. (But) if you do not worry, don’t insure. However, if that is not the case, spending a couple of thousand rupees annually to take care of it if things go wrong is a good thing to do. That is why if you look at the developed markets, they are very well insured as far as home is concerned because they know that if things go wrong, then they will need support to build everything again.

Let us take an example of a basic home (for the structure). You (may) have heard about gas explosions, cylinder explosions, and fires in high-rise buildings in Mumbai. A fire may not be your fault. It may have started somewhere else, but your house gets burnt. If there is an earthquake, a flood, storm, tempest, an inundation, or even terrorism, all that is covered under insurance. And, if you look at the cost, it is around 30 paise per thousand or about Rs 300 for Rs 10 lakh.  

The other thing is that the houses were earlier separate entities. If a loss would happen, insurance would reimburse the cost for restructuring that structure. Now, if you stay in a flat, the cost of reconstructing the flat may be Rs 50 lakh or Rs 1 crore, but the actual value of the flat may be Rs 10 crore. So, you get only Rs 1 crore for a Rs 10 crore flat.

Also, for the whole construction to happen, everybody must agree, so, suddenly you are homeless. You now must buy a flat with that money, which may be outside the town. So, we came up with ‘Agreed Value Policies’ in which you can buy a policy for Rs 10 crore for a flat, and if something goes wrong, you get the full value, so that you can buy a new flat.

We also came out with an add-on feature. If the flat is damaged, you get alternate accommodation, a similar flat till it (the damaged flat) gets rebuilt. So, when it comes to the structure of a home, there is a lot in home insurance that makes it relevant in current times.

If you have taken a bank loan, I am sure your bank would have also requested you to get a policy because they don’t want to put themselves at risk. So, the financier who is putting money into your dreams is so paranoid that they will have that cover because they know the cost is small for the structure. If something goes wrong, they get their money back. But it is your hard-earned money that is slowly paying this off.  

No, but they (lenders) will protect their interest. So, if your loan is for Rs 30 lakh, they may protect you for Rs 30 lakh which they will get back. But you may lose a higher amount, say Rs 1 crore. Then, you don’t get back everything. You should see that everybody who is giving you money is protecting themselves, but you are not protecting yourself against the money that you are pumping. You are the main person there.

In terms of the contents, it is even more interesting. If you experience something like a chain snatching, it is covered. If your baggage is stolen while you are travelling by train, bus, or taxi, that is also covered.

Travel insurance is only a small part, it covers you while you are travelling, and the bag is getting picked. Chain snatching is not covered under travel insurance but in home insurance it is. The concept was originally a part of the home insurance, which was taken to travel insurance.

So, in home insurance you can take a baggage cover, jewellery cover, and so on. You can also have a mechanical breakdown cover, which means if your fridge or television breaks down, that is covered. Your mobile and laptops are also covered. The price is a bit more than the (house) structure cover but still negligible compared to the cost of the entire stuff that you have.

When somebody asks me, what insurance should they buy or what did I buy? I tell them I bought three policies when I started my job in the insurance industry 33 years back. First was a health policy, second was a personal accident policy, and third was home insurance.

When I was young, I would think what could go wrong with me (in terms of health). And for any such incident, I should be covered and treated well by the best doctor, in the best hospital, without the constraint of money.

At that time, we hardly heard young people dying a natural death. These were mostly accidents. At that time, the cost for an accidental death cover of Rs 1 lakh was negligible, around Rs 20 to Rs 30. So, it was a no-brainer. So, I had that policy, and I also had home insurance.

Each of them has triggered at some point of time, except personal accidental cover and hopefully it won’t trigger now. I have had chain snatching and breakdown of appliances. But I never had to worry about going to the best hospital or the best doctor or replacing my stuff when things went wrong. So, I don't regret having bought these policies 33 years ago, and I continue with them.

Let us say you are living on rent and something goes wrong, your cylinder bursts and the flat goes on fire. Will your landlord file a claim against you for negligence? Will you be liable to pay to your landlord? Have you thought that might be possible? (If that happens) from where will you pay Rs 10 crore to the landlord? Have you thought about that? No.

It's like the two-wheeler case. I remember people saying, ‘What will go wrong with the two-wheeler? If something happens, I will pay Rs 4,000-5,000'. Then I ask them that if somebody gets hit by your two-wheeler and if there’s a death and the guy was earning well, do you realise that the claim could be for Rs 15 crore for a two-wheeler.  A lot of people don't realise that the liability they are carrying with them is so huge.  

Again, let me take the example of the US. If you move as a tenant in any flat, there is a renter's agreement and renter insurance. The first thing the landlord insists on is that you have the insurance before you move into the flat. In India, we have very optimistic people. We always feel the world will collapse but the only person who will stay alive is me. I think that's why we miss out on these fine points. Each landlord should ask for renters' insurance from the tenant. That's the first part.

The second part is that even tenants have contents like television, refrigerator, sofa, curtains, jewellery, and more. Those can also be lost, so the policies are for their own protection.

I would like to reiterate that buying something which ensures that your hard work of 10-15 years does not disappear overnight, and you’re not pushed back by 10-15 years, protect yourself against that.

You have worked all your life, built a house, accumulated contents, and now you are 60 or 65 years old, retired and don't have any source of regular income. Or maybe you have some small income but one day there is flood. It just washes everything away. At that age, you suddenly become dependent on others just because of (not buying insurance in exchange of) a few thousand rupees in a year. Why should you not have that? The only important thing is the realisation.  So, if something is taken care of, there’s nothing to worry, but if not, insurance is the solution for that.