Not declaring pre-existing illness will be considered fraud

Published in Mint on 16 June, 2015, Written by Abhishek Bondia

I am 32 years old. I had a high blood pressure (BP) problem six months ago. Since then I have been under medication and have brought it under control. Is it mandatory to mention this while purchasing a health policy? If mentioned, will the insurer charge a higher premium? How much extra premium is acceptable?
—Amit K. Das

I would always advise you to fully declare your existing medical condition during the proposal stage. The insurer will record it as a pre-existing condition.
In your case, any cardio-vascular problem, including a heart attack, will not be covered for the waiting period meant for pre-existing diseases. Typically, such a waiting period varies between two to four years depending on the insurance company.
If you do not declare known existing medical conditions, it will be construed as fraud by the insurer. It will give the insurer an opportunity to contest even an unrelated claim on the grounds of a void proposal form.
Underwriting practices vary by insurer. Some may not charge extra premium at all for your pre-existing ailment, others might ask for a 5-10% loading.
Generally, insurers with a larger book size are more lenient in underwriting.

How is the value of the structure and contents of a house calculated for home insurance?
—Gayathri

A home insurance can be done on three different kinds of valuations—reinstatement value, depreciated value or agreed value.
Under the reinstatement value, the current cost of replacing the item is considered. Under depreciated value, the reinstatement value is reduced by the applicable depreciation on the asset. And according to the agreed value, an assessment from an independent valuer is considered the basis of the sum assured.
Generally, the structure is insured on reinstatement value. Most contents except personal items are insured on depreciated value. Jewellery, antiques, and art are insured on agreed value basis.
Do note two aspects about reinstatement basis valuation for structure.
First, while calculating the reinstatement value for the structure, value of land is not considered. Only the cost of reconstruction is insured. Second, under this method, it is mandatory to reinstate the property. If the property cannot be reinstated, the insurer may settle the claim on depreciated value basis.
Of late, some insurance companies have started to offer cover for structure on agreed value basis as well. Under this approach, the value of the house for the purpose of insurance is determined on the basis of local circle rates applicable for the area.
In case of total loss, where reinstatement cannot happen (for example, terrain change due to earthquake), the agreed value is paid to the insured. Agreed value will always be more than the reinstatement value.

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