Tag: storm

How you can make your home climate-proof

Personal Finance

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The effects of climate change are strongly and clearly upon us — severe rains, landslides, hurricanes to scorching heat.

The recent report by the Intergovernmental Panel on Climate Change (IPCC) notes that South Asia is very vulnerable and India may suffer more frequent and intense heat waves, extreme rainfall events,erratic monsoons and cyclonic activity in the coming decades.

As homes offer protection against the elements, there is also a need to have a shift in how we approach residential property. Home sales and prices are not yet impacted by climate change considerations, except in a few coastal regions.

Rising risks

Data from the IPCC show three scenarios of mean temperature rise in South Asia – 1.9º C, 2.9º C and 5.1º C. Besides higher average, there will also be more days of extreme heat — over 40º C temperature. The best-case scenario projected is a 50 per cent increase, from about 40 days in a year now, and the worst case is up to three months of extreme heat.

This change will push up cooling costs for homes. In fact, analysis by the International Energy Agency shows that the share of electricity demand by homes, mainly for cooling, will nearly triple by 2030 globally.

The other hazard is cyclonic storms. Analysis shows that the Arabian Sea is likely to be most affected and in the past decade the cyclonic systems in the region already increased from two to three. The storm intensity, too, is expected to increase.

Floods are an existing danger and data from the Geological Survey of India show that 12.5 per cent of the country are major flood-prone areas. Coastal regions – nearly 7,000 km long – face the risk of water inundation from cyclonic storms. Rising sea levels also pose a threat, though the immediate effect may be limited to a few low-lying places.

Flash floods from glacier run-offs will be a peril for those in the Himalayan region.

Unpredictable monsoon, leading to not just high precipitation, but also water-shortage is also another factor to consider for some regions.

How to manage

While the prediction is dire, there are at least three ways in which you can tackle these risks from a housing perspective. The first line of defence is to consider locations that are relatively safer.

For example, you can refer to the vulnerability atlas of India (https://vai.bmtpc.org/) published by the Building Materials and Technology Promotion Council . However, it is likely that you may have limited options in picking a location, due to career or other considerations.

You can still find places in the city that are not low-lying, have better water drainage systems and choose homes that are built on an elevation. Be sure to inspect the area during the monsoon to see how it fares.

Even with that, you must buy insurance to cover for any damages.

Your losses can run high — the 2015 Chennai floods led to total claims of about ₹4,800-5,000 crore and the Uttarakhand flash floods saw insurance companies paying out claims amounting to ₹1,500 crore.

Flood insurance is a subpart of regular home insurance, and if there is potential for flood, you must opt for it. Make sure the insurance cover is comprehensive and includes multiple calamities. In general, there are two types of cover – structural and content.

While content plan typically covers damages to possessions due to fire and flood, structural coverage also includes damage to structure due to storm, lightning and others.

Given that the losses may be high, do not skimp on the insured amount.

Also, make it a point to check the amount during renewal, as it may alter over the years, based on the policy. For instance, the plan may be based either on the reinstatement value or on the market value of the property to be insured.

The former considers the cost of re-constructing the structure after damage while the later deducts depreciation, based on the usage of the building.

Four, pay attention to the thermal comfort of the home. This includes analysing the layout of the house, green cover and choice of building materials used.

These factors can together make it cooler by a few degrees. You can also look at solar and wind power solutions, to reduce your power bill.

The author is an independent financial consultant

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What you should know about standard home insurance cover

Personal Finance

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After announcing standardisation in term life and health insurance, the insurance regulator, IRDAI, is now set to bring standardisation in home insurance as well. As per its recent circular dated January 4, all general insurers should offer ‘Bharat Griha Raksha’, a standard home insurance product that covers home building and general home contents. This product is mandated to be made available with effect from April 1, 2021.

Given the low level of awareness for home insurance, a standardised product is a welcome move by the regulator. The coverage and benefits from such products will be the same across insurers and policyholder can choose at ease. But like any other standardised insurance products in the market, the premium for Bharat Griha Raksha too will vary with insurers. The difference in the premium is mainly due to factors such as services offered by the insurer (on-boarding, ease of contact by the customer, etc), claims settled and the digital access available for its customers.

Here is what you should know about Bharat Griha Raksha.

No declaration, waiver of underinsurance

A home insurance plan usually offers cover for both building and contents. The building is covered against fire, lighting, explosion, implosion, aircraft damage, riots, strikes and malicious damage, storm, cyclone and earthquake. The contents are covered against fire and allied perils, burglary and housebreaking including theft, accidental damage and electrical and mechanical breakdown. Policyholders can either buy a comprehensive cover or go for the building and content plans separately.

Bharat Griha Raksha too offers similar coverage for structure and/or general contents or both. The difference is that if you opt for a comprehensive cover, this policy automatically (without any need for declaration of details) covers contents up to 20 per cent of the sum insured for the building, subject to a maximum of Rs 10 lakh. In existing policies offered by various insurers, the policyholder should declare the value of the contents held by him/her when availing home insurance.

Under Griha Raksha, if you require a higher sum insured (over and above Rs 10 lakh provided), you can opt for the same by declaring the details of the general content.

Further, this standard policy gives complete waiver of underinsurance. Currently, in existing home policies, if the sum insured declared by a policyholder is less than the value of the property, then the insurer will settle the claim proportionately. But under Griha Raksha, the policyholders’ claim will be settled up to the sum insured (and not proportionately).

Also read: Key points to keep in mind while selecting an insurance policy

How much cover?

The coverage amount, or sum insured (SI), of a home insurance policy usually depends on the location of the house, the type of policy and the value of contents. As such, there is no cap or limit on the SI that can be opted, both in Griha Raksha and in the existing policies.

When it comes to the products already available in the market, you can choose SI for your property based on the reinstatement value or indemnity value or agreed value basis. But not all insurers provide the policyholders with these three options. For instance, Gruh Suraksha (comprehensive cover), the SI is on the reinstatement value. SBI General Insurance, on the other hand, provides all the SI options for the policyholders.

Reinstatement value, is the reconstruction value of the building or structure, determined by the reconstruction cost (excluding the land cost). This cost is usually arrived at based on the area of the building, as per the registered sale deed and the current market price in that area. Indemnity value too is the reconstruction cost of the building (excluding land cost) but it is reconstruction value less depreciation. Agreed value is calculated by multiplying the total square feet of the area (mentioned in the sale deed) with value per square feet as per the ready reckoner rate issued by the respective State government.

Similarly, SI options are available for the contents of a house as well, at replacement value excluding depreciation.

In standard Girha Raksha product though, the property value is the carpet area of the structure multiplied by rate of cost of construction per sq meter (as on policy commencement date). For contents, the SI represents cost of replacement of contents.

Riders

The standard product also offers two optional covers (rider) – one, insurance for valuables including jewellery, and curios and two, personal accident cover for the insured and spouse due to an insured peril during the policy period.

In comprehensive home insurance policies available in the market, most insurers offer coverage for both. For instance, Royal Sundaram’s ‘Gruh Suraksha’ offers personal accident cover for the insured up to Rs 5 lakh as also for jewellery and valuables. It offers coverage against terrorism as an optional cover. Other insurers in the market (offering comprehensive policy) also offer optional covers including temporary resettlement, compensation cover for domestic staff if injured during work and keys and lock replacements.

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