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Last Updated : Apr 18, 2019 09:27 AM IST | Source: Moneycontrol.com

Viewpoint | Four important aspects of property insurance

The loss of property due to fire is more common than you think.

Rajiv Jamkhedkar

Rajiv Jamkhedkar

A fire policy to cover your precious home, office and shop or godown is simply a must. The real estate assets usually run into lakhs and crores, and the reconstruction of property is extremely expensive apart from being painful.

As I write this, one of the major news updates of the week is a dramatic fire destroying the iconic Norte Dame Cathedral in Paris. The Notre Dame is one of the most recognisable monuments in the French capital. Tourists throng it, the locals take pride in it and immense pain, effort and money have been spent on preserving it, conserving the beauty of the gargoyles carved on the outside and the typical gothic architecture. Yet, when I watched it burn in huge flames going all the way up in the sky, I could not but remember the words of a very good insurance broker I know. He used to say, “The loss of property due to fire is more common than you think.”

It bears repetition, again and again. In the housing society that I live in, a modern building complex, there have been 3 instances of electric fire gutting down an entire apartment in the last five years of my memory. My own flat has had a major fire that fortunately did not cause much damage but was difficult to control. Once a fire starts in small flats of our cities, it spreads so easily due to the household goods and pieces of furniture that the damage happens in minutes. Yes, it takes minutes to lose an expensive home or a decorated office or a shop filled with goods.

In older buildings, timber was much more prevalent as a building material. These buildings still exist in our cities in the older parts. It is applicable to houses, shops and offices. South Mumbai, Old Delhi, older parts of Ahmedabad, Pune and all South Indian cities come immediately to mind. The buildings in these parts were made at least 50 years back. That is the reason one reads in the newspapers and TV channels about fire destroying buildings in these parts more often.

However, the reality is that electrical fire is equally capable of causing a loss of property due to failures. Many of the office and industrial estates have not got adequate protection. The wiring, fuses and modern circuit-breakers are not of good quality or are not replaced for a long time.

A fire policy to cover your precious home, office and shop or godown is simply a must. I am amazed that people take the risk so casually. The real-estate assets usually run into lakhs and crores. A reconstruction of property is extremely expensive apart from being painful. If your property is not covered by insurance, please do it on priority.

The second aspect of property is flooding. Flash floods are increasingly common in our cities as climate changes cause heavy storms and cyclones. Our cities’ drainage system has not been upgraded to keep pace with population growth, density and the rise of suburban construction. The traditional drainage of rivers, canals, nullahs etc are choked and are not cleaned of silt and garbage. As a result, there have been dramatic pictures in the news of many Indian cities - Ahmedabad, Chennai, Delhi, Varanasi, Guwahati- having laid siege in the face of heavy rains or cyclones. There have been massive damages to properties in these cities. Godowns, shops and basements, ground floors are the most common victims. The eastern coast of the country is particularly susceptible to cyclones and flash storms - Andhra, Odisha and Tamil Nadu.

The third aspect is earthquake. Many people are not aware that the areas lying below the entire arc of the Himalayas is one of the most earthquake-prone regions in the world. This is because of geological reasons of tectonic plates under the earth’s surface constantly shifting and still moving. The arc of the Himalayas ranges in length equal to a distance between London to Istanbul from Jammu and Kashmir to Sikkim and Arunachal Pradesh. Uttarakhand, Delhi, Terai regions and the north-western parts of Uttar Pradesh are particularly vulnerable. Therefore, people living in these areas must ensure that their property insurance covers earthquake damage. Typically, the insurance policy does so.

The fourth aspect of property insurance one must take into account is content insurance. The property insurance aspects discussed in above paragraphs covered the damage to the property only. A claim on insurance will cover the reconstruction to the building only. However, a residence or a shop, especially godowns, may contain valuable contents - goods for trade, raw material, furniture and fixtures, equipment including computers, artefacts, white goods etc. a property Insurance gives the insured person an option to cover the contents of the property. One has to ask for this option as this is generally not a part of a basic insurance policy. It is wise to estimate the correct value of the contents and insure up to that amount only. Do not try to over-value the contents. Take a conservative and realistic market value.

Property Insurance is a crucial cover for all people who own valuable real estate. Ignore it at your own risk. It comes at a small price and provides real peace of mind when a rare calamity strikes.

(The author is founder and managing director of Serengeti Ventures Pvt. Ltd)
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First Published on Apr 18, 2019 09:05 am
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