Ramesh Dheer,a senior manager with a Gurgaon-based company for instance, thought that he had made a smart move by getting his newly bought Rs 70-lakh apartment insured.Unfortunately however;the flat got destroyed in a fire just after some time and when he lodged his claim, the insurance company refused to pay him in full.

So, what went wrong in this case? According to experts, the devil lied in the manner the house was insured. In fact,Mr Dheer had got his house insured.In Fact Mr Dheer company had got his house insured at the market value, which also included the cost of land. Usually however: the fire policy does not Cover land because land continues to exist even after a fire or flood destroys an apartment complex. So, Mr Dheer in this case was over insured and the insurance Company was within its right to pay only  For the replacement cost of the apartment.

What They Cost

Fire insurance ( Premium rates) Rs 50 per lakh,
Burglary Rs 50-100 per lakh,
Jewellery 1-1.25% of sum insured
Plate Glass 0.5-1% of sum insured
Home Appliances depends on items
Pedal cycle Rs 10 per Rs 1,000
Electronic items 1% of sum insured
Baggage Rs 1 per Rs 1,000
Personal Accident Rs 150 per lakh
Earthquake Rs 10 per lakh
Terrorism Rs 10 per lakh

"Many people incorrectly insure their homes, and even their offices or factories, either on the market value or the book value the price they originally paid for it. In the first instance, they and up taking a higher sum insured while in the second, they underinsure their property resulting in claims being paid as per the average of the underinsurance, says Pavanjit Singh Dhingra, vice president,Prudent Insurance Brokers.

In householder's insurance, therefbre, the most important thing to consider is the valuation of one's proporty and valuables. Building and EFF (furniture, fixtures and fillings) should be insured on a reinstatement basis because in the event of a loss, both would have to be repland at today's cost of constrution or replacement.

Likewise, household goods should not be insured at the purchase(book) price, as adjustment for depreciation would result in very little calm being paid. It is also not always easy to know the replacement cost. So one may have to use approximations and also keep a list of contents separately (not in the home) so that if there is a major loss, one knows what all the items were at home.

For stand-alone structures such as properties purchased more for long-term investment than as a place of residence long-term policies of 10 years can he purchased either at significant discounts or with a provision for an inbuilt annual increase in sum insured. Premium rate is less than Rs 2 per day Rar a house with an HIV (reinslatement value) of Rs 10 lakh for fire and burglary risk.

In apartment complexes, where there are many owners, it does not make sense for individual owners to insure their homes. In this case, the society or association should insure the entire complex at the reinstatement value -i.e. the present cost of constructing the same building. An apartment complex not only includes flats, but also substantial common areas and amenities. These also needs protection. Besides, group discount can be given in case of insurance for the entire apartment complex, which can reduce the premium.