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Sep 14, 2017 03:21 PM IST | Source: Moneycontrol.com

Protecting yourself against unforeseeable risks

By insuring and protecting our homes and belongings, cars and health, we can remain equipped to face any situation.

Puneet Sahni

“We cannot stop natural disasters but we can arm ourselves with knowledge,” model Petra Nemcova’s words reflect our innate helplessness when it comes to dealing with natural disasters.

And as the UN statistics show, natural calamities - such as the hurricane Irma that just laid waste to Caribbean Islands and parts of the US - have been on the rise since the last five years, ruining lives of millions perpetually. In fact, India has experienced some of the worst natural disasters in the last two decades; there were ten major earthquakes that led to over 20,000 deaths in the last 15 years, displacing millions, according to the National Disaster Management Authority (NDMA). From severe earthquakes in Latur and Gujarat to some of the worst floods in Chennai and in Mumbai, natural calamities (or the `act of God’) have been affecting both rural and urban India relentlessly, causing immense damage to houses and properties.

However, natural calamities have been occurring since time immemorial yet our response has been found wanting on most occasions. Disasters like floods, earthquakes and tsunamis destroy homes, property and valuables and vehicles besides spreading communicable diseases. Since natural catastrophes are inevitable, the only way we could deal with them is by preparing ourselves against the worst fall out. By insuring and protecting our homes and belongings, cars and health, we can remain equipped to face any situation. Let us look at some basics about insurance in each of these areas.

Home insurance

Home insurance is indeed a great way to protect your home and precious belongings as it covers you against financial liabilities arising from the damage or loss of your home and its contents due to natural or man-made reasons. One can also acquire additional covers for fire, burglary and theft, etc. for specific protection, depending on your need, leading to total peace of mind.

Protecting the structure of your home: A home insurance policy offers financial protection to your house if it gets damaged due to natural or man-made calamities in three ways: Reinstatement Value – wherein a policyholder gets a value that equals the construction cost, Agreed Value (offered only for aprtments/flats) – which includes the land value and the cost of construction or the market value of the house (construction cost and the depreciated value as per the age of the building).

Cover for personal belongings: One can seek a home insurance policy - for covering personal valuables and belongings like furniture, jewellery and electronics - either by buying a cover that accounts for market value of reinstatement value.

Additional covers: Home insurance policyholders can avail additional covers and riders with an additional premium. For example, in the event of damage to an insured place, residents get alternative accommodation till the repair is over subject to certain conditions. One can seek a rider against personal accident and for compensation for partial or permanent disability.

Financial security via health insurance plans

Like home insurance, health insurance too is a low priority for most Indians even though emergency healthcare costs continue to ruin families across rural and urban regions. Few realise that health insurance can provide adequate risk coverage against unforeseen medical emergencies, including critical illnesses. On an average, costs of medical tests, doctor fees, hospitalisation and medicines have gone up and as the medical inflation continues to rise, not having an adequate health cover can ruin your financial security. It is advisable to assess your need for various health  insurance covers such as basic hospitalization, personal accident, OPD cover and critical illness benefit. One can draw a combination of insurance covers to safeguard the financial hardship one faces in case of a medical exigency.

Understand restrictions: Even if the sum insured looks good enough, restrictions like sub-limits and co-pay in policies (including the cap for a particular illness or a facility or limits on surgeries) can put you in a difficult situation.

Lower costs through smart choices: A family floater plan that comes at a reasonable premium serves a family better. A family floater would cover you, your spouse, and your dependent children (up to an age of 23-25 years) along with your dependent parents. The premium would depend on the opted cover, number of members covered, the sum assured and the eldest member’s age. One may keep the overall health status of the insured in mind to rightly judge a reasonable sum insured.

Go for cashless, larger hospital network: One must choose the right options and the nature of the advantages (must be compulsorily cashless), network of hospitals (an ideal policy must have few leading hospitals near your residence) and other benefits like exemptions (under Sec. 80D of the Income Tax Act, 1961).

Vehicle insurance

Visuals of vehicles floating around in flood waters or being destroyed in fire are symbols of natural carnage in mind. Personal vehicles come lower in the priority list, partly due to their dispensable nature and the total reimbursement for a replacement. Most of us are aware of the vehicle insurance since it is legally binding for a car owner to have one. However, there are guidelines, useful to make your car ownership trouble-free, in the event of a natural calamity.

Renew on time: One must not fail to renew car insurance on time, every time. If you miss the insurance renewal, it will lead to unnecessary hassle such as a fresh pre insurance vehicle inspection. This would be highly detrimental if the vehicle gets damaged by a calamity. While getting a cover, ensure that you have provided correct information. If your car gets lost or destroyed, you may not get any insurance benefits if you have made any false declarations.

Have useful additional covers: One must get complete information about the additional covers available before these can be integrated into your car insurance policy for additional coverage. The usual covers available are for covering depreciation for replacement of parts, covering the full invoice value of the vehicle in case of total loss, protecting the No Claim Bonus in case of a claim in the policy period and many more.

As seen from some of the recent disasters, natural calamities have become common feature in our lives. Climate change or not, these keep occurring with higher regularity and alacrity. While we are helpless against Mother Nature, the best we can do is to be protected financially so as to continue with our normal lives.

The writer is head-product development, SBI General Insurance
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