What is property insurance? A primer

Jan 04, 2019 | 2 weeks ago | Read Time: 3 minutes | By iKnowledge Team

Property Insurance is an umbrella term for different types of insurance that cover the risk of loss. The object insured will differ. The basis of the policy is a reimbursement for losses due to specific events. For example, loss due to fire, burglary insurance for homes, marine insurance for cargo, construction insurance for contractors, etc.

Dinesh was a homeowner who had his own flat in an upscale area of Mumbai. He lived in a secured building, in a gated community, and yet, as a practical man, he opted for fire insurance for his house. He continued paying policy premiums for multiple years, until one day, a fire broke out in his house and destroyed most of his furniture. Because he was insured under fire insurance, his claim was honoured immediately by the insurance company. Nothing could replace the loss of his furniture, but getting compensated for the loss reduced the impact of the fire.

Dinesh is not like most of us homeowners, or indeed, most business owners. The traditional understanding of insurance is restricted to life and health insurance, and at the most, travel insurance for those travelling abroad. But, the risk of loss or damage to homes, offices, buildings under construction, burglary are equally important to be covered. All this coverage falls under the bracket of property insurance.

What is property insurance?

Property insurance is a term meaning the insurance or coverage of anything whose loss will cause untold damage to the policyholder. It may be jewellery in a house, damage to equipment for a business owner, loss of cargo during transit for an importer or exporter, risk of loss of goods for a shopkeeper and so on.

Property insurance is calculated based on the value of the objects insured. The current market value of the object to be insured is taken as the sum assured for this purpose. For a homeowner, it may be the current value of the house, and the furniture and other items that have to be insured. For a shopkeeper, it will be the value of goods that are currently lying in the shop. For a factory owner, it will be the value of inventory, equipment and raw materials that will be insured. A property insurance policy covers all these risks.

What are the risks that are insured?

Some of the risks insured are loss and damage due to:

  • Unforeseen damage/loss to property
  • Theft
  • Specified natural disasters
  • Damage due to water (bursting of pipes, flooding of home)
  • Delay to cargo due to any reason
  • Damage to cargo (jetsam, flotsam)
  • Insolvency of buyers
  • Riots

There may be other reasons for loss and damage that depend on the object being insured and the risk that has to be covered.

What are the types of property insurance?

There are many insurance products that come under the umbrella of property insurance. Given below are just select examples.

  1. Fire Insurance: A fire insurance insures not only the risk of fire, but also other unforeseen loss or damage to the property due to lightning, explosion, aircraft damage, landslide, flood, cyclone, storms, typhoon, hurricane, water damage due to bursting of water pipes and sprinklers etc.
  2. Burglary Insurance: This insurance covers loss due to theft. It can be offered for a house or for a business establishment. It covers loss of stock, cash, valuables, important papers etc. kept in a safe (if covered). It covers damage to the property during a burglary or an attempted burglary.
  3. Marine Cargo Insurance: Marine Cargo insurance is an insurance that covers loss or damage to cargo in transit via water. There are different types of risks that can be covered. Marine cargo covers any loss during transit, any loss due to breakage, loss at sea etc.

Why should a homeowner opt for home insurance?

There are various uncertainties in life and there is a chance of loss due to unforeseen circumstances. The risk of damage and loss due to floods and natural disasters is now becoming more real. The case in point are the flash floods in Kerala and Himachal Pradesh and the fire at a restaurant in Lower Parel in Mumbai. Such events can cause untold loss and damage. This is why it is essential to opt for home insurance.

 Along with home insurance, it is necessary to take insurance on your life, in case something unforeseen happens. Opting for term insurance such as Aegon Life’s iTerm Insurance plan will give you a high sum assured for an affordable premium. This plan offers an option to increase the sum assured based on events such as marriage, birth of children, and it offers different payout options such as lumpsum, monthly income plan etc for the family. The iTerm plan has riders such as critical illness, accidental death and disability which provides an added layer of security, and is especially beneficial when combined with property insurance.

So, have you looked at buying a property insurance policy today.

II/Dec 2018/4734

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