Insurance is an agreement between two parties, namely the
owner of a property (insured) and the insurer (insurance company), whereby the
insurance company undertakes to indemnify the owner of the property the
financial loss that the owner may suffer in case the property is damaged or
destroyed by a cause for which the insurance policy is taken. Insurance is one
of the ways to protect buildings against natural losses and vandalism. The
types of coverage available include fire, consequential loss, personal
property, public liability, casualty, and surety bonds, workers' compensation.
The risks are covered only after the premium is paid and the policy liability
is limited to the insured sum and for a specified time limit till the policy is
kept alive.
In India, an insurance company has come out with a scheme
for householders to cover various risks with a single policy protecting the
members who permanently reside in the house, including domestic and electrical
appliances. Another company covers the possessions against different disasters,
including fire, natural accidents, explosion of gas cylinder, bursting of water
tanks and pipes, impact damage caused by vehicles, riots, strikes, malicious
acts, burglary and mechanical breakdown of domestic appliances and so on.
Title
Insurance Policy:
Under this policy, the policyholder is protected from
losses arising from defects in the title. Based on the enquiry the insurance
company determines whether the title is insurable. This is the best defence of
the title. The company will defend any suit based on an insurable defect and
pay claims if the property title proves to be defective.
Fire
Insurance Policy:
This policy covers against direct loss or damage to the
property due to fire. The actual amount, which the insured will receive depends
on the actual loss suffered. Full reinstatement can be received only if the
property had been adequately insured by payment of appropriate premium. If the
building had been underinsured, only proportional sum will be paid. The valueof the property is arrived at the reinstatement cost irrespective of any other
value. Normally, the value of foundation is excluded.
Sometimes, an old building which is destroyed completely
by fire cannot be reinstated in its previous condition due to restriction by
changes made in the local municipal laws. In such a case, the insurance company
may not compensate the insured of the loss suffered by him on the building cost
that is not cleared. If loan is availed while purchasing a property, the
mortgagee insists on the insurance cover of the property.
Earlier, the value of personal properties in a house used
to be only 25 per cent to 50 per cent of the value of the house. At present,
the value of personal properties in a house has increased substantially.
Public
Liability Insurance:
This policy covers the damages that may be inflicted on a
third party by the act of omission or commission The cost of insurance can be
reduced in several ways like accepting higher deductible amount, installing
security devices, installing fire alarms, and by comparing various terms and
conditions issued by insurance companies.
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