Fire and special perils policy covers 12 risks

Published in Mint on 19 May, 2015, Written by Abhishek Bondia

Why does my insurance company ask for a health check-up before policy issuance? Recently, the insurance company declined the proposal to cover my mother. Is their stand valid?
—Ashwin Khattar

Insurance companies are entitled to conduct medical underwriting before policy issuance. This allows them to evaluate whether or not to insure an applicant. Every insurer has a customized set of medical tests that vary by age. For higher ages or high sum assured, advanced tests such as treadmill tests are done. The insurer then has the option of accepting the proposal at standard premium, increasing the premium, accepting the proposal with exclusions or rejecting the proposal. A pre-issuance medical check-up by the insurer is beneficial for the insured because it materially reduces the risk of claim rejection.
While the insurer is entitled to reject a proposal, you should enquire about the exact cause. At times, clarification about pre-existing conditions and prior treatment can convince the insurer to issue insurance.

We are a start-up with five employees. Can I buy insurance for them the way large companies do?
—Anirudh Deshmukh

A company can buy group medical insurance for its employees irrespective of employee base. The important consideration, particularly for small groups, is that there should be no anti-selection. This means it should not be optional for employees to opt for insurance. A group cover offers advantages that just cannot be matched by individual insurance. For example, pre-existing diseases can be covered immediately with no waiting periods, medical tests are not required, and so on. Other terms such as room rent limits and co-pay can be customized to fit the company’s budget. For a small group, Rs.2 lakh of sum assured will cost about Rs.3,000 per person insured.

What risks are covered under home insurance?
—Gayathri

The coverage for home insurance varies by company. At a minimum, the standard fire and special perils insurance policy for home insurance covers 12 risks. The major ones are external fire including bush fire, storm and flood, and riot and malicious damage. Apart from these standard 12 risks, companies offer to cover earthquake, terrorism, burglary and theft. The earthquake cover, in particular, is important for cities in seismically active areas. Do make sure you ask for this extension when buying home insurance. There are certain policies that provide an all-risk coverage subject to named exclusions.
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