Buy a home insurance policy that pays actual cost of repairs

Published in Mint on 28th August, 2017. Written by Abhishek Bondia

I am looking to buy home insurance for my apartment. If I buy a long-term policy (10 years) now, will the rates be locked-in for the period, regardless of increase in premium for renewals?

—Harpal Khanna

Yes. If you buy a long-term policy, premium is charged for the entire period at a go. Once such premium is paid, risk cover is issued for the entire period. The insurer cannot ask for additional premium in future years. However, you must make sure that the insurance is issued on reinstatement basis and with an escalation clause for sum assured. This insures that even if there is damage in the later years, your insurance cover is adequate and cannot be classified as under-insurance by the insurer. Also, you get paid actual costs of repair rather than a depreciated value.

I am 39 years old now. In 2011, I had heart surgery and a bioabsorbable (dissolving) stent was inserted in an artery. I did not have health insurance then. Since then I have been living a healthy life and have had no reason to visit a doctor except for the occasional fever or flu. Since I no longer have the stent in my body, do I need to declare it while applying for a health insurance policy?

—Rahul Agarwal

Yes, you need to disclose the heart surgery in the proposal form. Insurers specifically ask about any major hospitalizations and past treatment. Your surgery qualifies. In case of any future hospitalization, your treatment history would be recorded by the treating doctor. The insurer would reject a claim if the treatment history does not match with the details disclosed in the proposal form. A policy is considered void if the insurer can establish that proper disclosures were not made at the time of policy issuance.

I am buying a second hand car in the Delhi-NCR region. I have zeroed in on a car that was taken very good care of by the previous owner, and he was eligible for a 50% no-claim bonus. When I get the car’s insurance transferred, will I also get the benefit of that no-claim bonus?

—Shantanu Agnihotri

No-claim bonus is linked to the owner of the car and not the vehicle. When the car insurance is transferred, the no-claim bonus can be retained by the owner and utilized for some other vehicle. The bonus does not get transferred to the new owner.

As a director of a company, how can I protect myself against litigation from small shareholders? I do not want to be caught in boardroom battles. What happens after I step down from the board?

—Sanjiv Dua

You can ask the company to buy a director and officers’ (D&O) liability insurance policy. Such a policy would pay for costs to defend any lawsuit against your name as the director of the company. Defence costs would include the cost of hiring a lawyer or consultant to respond to notices, investigation, or litigation. In case courts award a compensation against the director for acts of unintentional negligence, such compensation would also be reimbursed by the policy.

A typical D&O insurance policy carries a discovery period for a retired director. A discovery period allows to file a claim under the policy, even if the policy is not active for the concerned director. This is true provided the alleged act was carried out while the policy was in force. Typical discovery period under a D&O insurance is about 7 years.

I go abroad frequently. Each time I have to buy a separate travel policy. Often, it becomes a last-minute chore. Can the same policy be valid for multiple trips?

—Karan Tiwari

Travel insurance can be taken for a single trip or multiple trips in a year. If you are a frequent traveller, an annual multiple-trip policy may work out to be more cost-effective and easier to administrate. Typically, such annual policies cover all countries. If your travel does not include the US and Canada, you could opt for a global policy excluding these two countries. This would help to reduce your premium. In an annual policy, generally a limit is defined for maximum number of days for a single trip. This could go up to 45 days. If your overseas trip last over 45 days then you would need to inform the insurer before hand.

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