The chilling video of the Uttarkashi flash floods showed once again how helpless we are when nature strikes in all its fury. In only a few minutes, the entire village with all its houses was washed away, and death and destruction ensued.
Lack Of Awareness
Data shows that less than one per cent of Indians are covered with home insurance. On insurance awareness, some may not be aware, some are aware but feel it is unaffordable, and for some, awareness and affordability and not issues, but the value perception for insurance is low.
“Even if one had home insurance on a reinstatement value basis, the difficulty in rebuilding at the same site could be time-consuming if not impossible in some cases,” says R Balasundaram, Secretary General, Insurance Brokers Association of India (IBAI).
Why Insurance Is Crucial And What It Covers
Property damage from floods and landslides is common in Uttarakhand and can cost lakhs to repair or rebuild a house. Additional risks, such as loss of household contents, including appliances, furniture, and valuables, are also covered. “Temporary relocation costs if homes become uninhabitable. Income disruption, especially for families running home-based businesses, can also cause financial loss to the house owner,” says Amrish Dubey, senior vice president (SVP), personal lines, TATA AIG General Insurance.
Most of the home insurance products cover both the structure and contents of the home against natural calamities. Few policies offer additional living expense coverage, helping families afford temporary housing in the event of an insured peril.
Traditional home insurance policies offer protection against named perils such as fire, storm, flood, inundation, earthquake, etc, to minimize the financial risks. “Insured should review coverage periodically to adjust for inflation, renovations, or new valuables. New-age home insurance policies offer all-risk cover for buildings and contents and come with varied add-ons to choose from.
A lot of people assume the reinstatement cost with the market value. However, it's important to take into account the reconstruction value in a traditional product, like Bharat Griha Raksha. All relevant declarations should be disclosed prior to policy inception, as the same could affect the claim settlement. Regularly evaluate the risks and offerings in the policy opted and parallelly, explore newer products for wider benefits.
How The Government Can Play A Part
When a disaster strikes, the government steps in with financial aid that may cover only a portion of the financial hardship. So, what is the answer? The government can mandate that there has to be compulsory insurance of houses in specific areas and mandate every insurer to take up such risks, as done in the case of rural obligation.
Maybe the government can contribute part of the total premium. “Alternatively, state governments can buy insurance with parametric triggers, reinsurance-driven, and in case the thresholds are breached, collect from insurers and use the money towards aid to the people,” says Balasundaram.
