The standard Bharat Griha Raksha home insurance policy offers an automatic increase in the sum insured: should you buy?

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High premiums are one of the main reasons many people do not purchase home insurance. That is why, in January 2021, the Insurance Regulatory and Development Authority of India (IRDAI) issued guidelines for issuing a standard home insurance policy called Bharat Griha Raksha (BGR) intended to cover residential properties at affordable premiums.

The insurance regulator has mandated all general insurance companies to offer this standard insurance policy and therefore most insurers have started offering this insurance coverage from April 1, 2021.

Here is an overview of the features of Bharat Griha Raksha insurance coverage and whether you should get it.


What is insured under the policy?

Real damage: According to IRDAI guidelines, common damages covered by Bharat Griha Raksha include fire, explosion or implosion, lightning, earthquake, volcanic eruption or other convulsions of nature, storm, cyclone, typhoon, storm, hurricane, tornado, tsunami. , flood and flood, landslide, landslide, bush fire, forest fire and jungle fire.

The policy also covers damage caused by impact or collision caused by external physical objects such as vehicles, falling trees, airplanes, walls, etc.

Apart from these, the policy covers any loss or physical damage, or any destruction caused to the insured goods by theft within 7 days of the occurrence and in the immediate vicinity of one of the insured events.

Associated costs: In addition to the actual damage, the policy covers many associated costs that often arise with major damage. He pays up to 2% of the claim amount for reasonable costs of removing debris from the site.

“The police pay up to 5% of the amount of the claim as reasonable fees for the architect, surveyor and consulting engineer. In addition, the police also pay for lost rent and rent for alternative housing when the structure of the house is not suitable for living due to physical loss, ”said Pallavi Roy, executive vice president ( product development), IFFCO Tokio General Insurance.

Man-made disasters: Certain man-made disasters are also covered by this policy, including riots, strikes, malicious damage, acts of terrorism, and missile test operations. “Previously, home protection was the responsibility of the SFSP policy which had terrorism as optional coverage. With the launch of the BGR product, which is uniquely dedicated to protecting the home, terrorism has become a cover built into the product, ”explains Roy.

Default home contents coverage unless excluded

In many cases, any damage to the home also results in damage to the contents inside the property. BGR offers automatic coverage for content. The sum insured for the general contents of the house is automatically 20% of the sum insured for the house, which is capped at Rs 10 lakh if ​​the house is covered. If a policyholder does not want this feature, they have the option to opt out as a saved choice.

Optional cover

In addition to the basic cover and the built-in covers, Bharat Griha Raksha offers two optional covers, namely, (1) the cover for valuables on the basis of the agreed value (under the cover of the contents of the house) and (2) personal accident coverage for the insured and his spouse. when the insured risk causes damage to the construction of the house and / or the contents of the house and also results in the death of one or both.

If the value of these items in your home is significant, you can give the details and opt for higher home contents coverage. “If you want to insure valuable content such as jewelry and ornaments, you can do so by choosing to add coverage for it,” says Rishad Manekia, Founder and Managing Director of Kairos Capital, a registered investment adviser at SEBI.

This coverage may increase if you opt for a higher sum insured for the contents of the house and declare the details. A certificate of appraisal must be submitted if the sum insured for the contents of value exceeds Rs 5 lakh and / or the value of an individual item exceeds Rs 1 lakh, “says Subramanyam Brahmajosyula, head of product development, SBI General Insurance.

Optional coverage for valuable content based on agreed value is available upon declaration of details and presentation of a valuation certificate. “Valuable items such as jewelry, silverware, paintings and works of art can be covered on the basis of an agreed value,” says Roy.

However, if the selected sum insured does not exceed Rs 5 lakh, it is not necessary to present an appraisal certificate. The additional premium for these add-ons cannot exceed 50% of the basic premium for BGR.

Let us now see the characteristics of the policy according to the guidelines of the IRDAI.

Main characteristics

Higher sum insured

Rather than market value, coverage under this policy takes into account the cost that will be incurred to repair or replace the covered items.

“Under the Bharat Griha Raksha policy, there is a mechanism to arrive at the sum insured. The details of the policy indicate that for the residential structure of the insured, including fixtures and fittings – the surface of the carpet of the structure in square meters multiplied by the construction cost rate at the start date of the policy will be taken into account in calculating the sum insured, ”explains Rakesh Goyal, Director, Probus Insurance.

The sum insured may be greater than this value but not less. “The cost of construction rate is the rate in effect for the construction cost of the construction of the insured’s house at the start of the policy. , adds Goyal.

Affordable premium

Under BGR, many insurers offer coverage at affordable rates. For example, you can get Rs 1 crore sum insured against an annual premium of Rs 2,466 from Digit, which means an annual premium of Rs 247 for every Rs 1 lakh of sum insured. Over a 10 year period, you spend Rs 24,660 for protection of Rs 1 crore.

Premiums for coverage of Rs 1 crore under Bharat Griha Raksha
Insurer Annual premium *
New insurance India 3,000 rupees
Bajaj Allianz Rs 2,714
Cholamandalam 4 180 Rs
Figure Rs 2,466
ICICI Lombard Rs 4072
* Including GST; Source: PoliticsBazaar.Com

Benefit without underinsurance

Underinsurance does not apply to this product, a special feature of this policy. “This is a unique feature of this policy. This basically means that if the sum insured, which is calculated on the basis of the information you have provided to the insurer, is less than the actual value at risk, then the difference will not affect the amount payable, ”explains Brahmajosyula. .

For example, suppose the area of ​​your residential building is 100 m² and the construction cost rate for the city is 15,000 rupees per m². By mistake, you declared an area of ​​90 m², and your building is insured for Rs 13.5 lakh instead of Rs 15 lakh. If there is a loss that requires repairs that cost you Rs 5 lakh, the insurance company will pay you Rs 5 lakh.

Annual increase in the insured capital as part of a long-term policy

The replacement cost of building construction rises over time due to inflation, which means building the house 10 years later would be several times what it costs today. To solve this problem, the BGR policy has an automatic escalation feature whereby the insured amount is increased every year.

“For a long term policy, say 10 years for example, the automatic annual increase feature of 10% is present. In other words, under a 10 year policy, the sum insured will double by itself by the time the policy period ends (10% increase each year), ”says Tarun Mathur, CBO-GI, Policybazaar.com.

Being an integrated feature, it will not cost an additional premium for policyholders in the future. “The 10% increase in the insured capital each year is one of the worthy characteristics of this standardized policy. Here, the face amount automatically increases, during the term of the policy, by 10% per annum at each policy anniversary without any additional premium to a maximum of 100% of the sum insured, ”says Roy.

Daily progress for annual policy

Rising prices is a phenomenon that occurs not only annually but gradually. To benefit from a higher cost over time during an insurance year, the BGR offers a daily escalation of the sum insured. For an annual contract, the insured capital is automatically increased each day by an amount representing 1 / 365th of 10% of the insured capital on the Effective date of the contract.

What is excluded?

Although the policy covers most common damages, some damages are not covered. Damage in the list of exclusions includes the loss, damage or destruction of any electrical / electronic machine, apparatus, apparatus or accessory by overshoot, excessive pressure, short circuit, electric arc, self-heating or electrical leakage. whatever the cause (lightning included). This exclusion only applies to the particular machine so lost, damaged or destroyed.

Should we buy?

A standard home insurance product simplifies coverage, making it easy for an insured to understand. Standardization also forces insurers to offer very competitive premiums. Since most of the specifications are the same from one insurer to another, it’s easier to compare premiums and select the policy of your choice. Careful financial planning requires securing financial protection for valuable assets, and this policy is a good way to get that protection at an affordable rate.

“Anyone who owns a home can consider purchasing this policy. Even a tenant can take this policy to cover against possible loss of the general contents of the house due to natural disasters, fire or theft. Considering the nominal premium of these policies, it is a good way to transfer your risk to insurance companies, especially for those who live in hilly areas, flood prone areas or high earthquake risk area etc. », Explains Manekia.


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