Published in Mint on 25th June 2018. Written by Abhishek Bondia.
What does hypothecation mean? Does it apply to personal accident policies too?—Senthil
Hypothecation refers to pledging an asset to a lender. In the event of a default, the lender can confiscate the asset to recover their dues. When an asset is mortgaged, its insurance policy can carry a ‘bank clause’ with the name of the lender. In case the asset is damaged, the lender would have the first right to the claim. If the loan is regularly serviced, then the lender can give a no-objection certificate for the claim to be paid to the insured.
Hypothecation cannot be done on an individual’s life. So, a bank clause is not applied on personal accident policies. In case of life insurance, the benefit of the insurance may be paid to a lender in case the borrower dies.
Is it better to buy a health policy that has in-built cover for cancer, or a stand-alone policy?—Sajid Ali
Standard health insurance policies cover cancer. Such policies indemnify you for the cost of hospitalisation and chemotherapy incurred for treatment of cancer. Most policies will also reimburse 30 days pre-hospitalisation and 60 days post-hospitalisation cost.
An additional critical illness plan that covers cancer, would pay a lump sum if the insured gets diagnosed with cancer. This is in addition to the indemnity you will get from a standard medical insurance. Financial support from such plans helps to cover loss of income during treatment, incidental non-medical expenses and cost of second opinion in India or abroad. I recommend you buy a critical illness plan in addition to a standard mediclaim cover.
Note that buying an indemnity plan for cancer will serve limited purpose. In the event of a claim, either your standard medical insurance or cancer indemnity plan will pay.
We are moving to Bengaluru from Gurgaon and have availed the services of a movers and packers company. What sort of transit insurance should we buy?—Anita Pathak
You can buy a standard inland transit insurance. Typically, for household goods, insurers offer ITC-B coverage (Inland Transit (Rail or Road) Clause –B (Basic Cover)). This is limited risk cover for major accidents such as fire, earthquake, and overturning of the vehicle. ITC-B would exclude any handling losses. You can upgrade the cover to ITC-A (All Risk) after getting an inspection conducted by the insurer. Inspection costs about ₹5,000, apart from the cost of insurance.
How are art pieces valuated for the purpose of insurance? My father has a collection of about 20 old cameras, which are collector’s items now. —Sahitya Kaul
Art items are insured on an agreed value basis. The insurer appoints a valuer before they accept insurance for art pieces. Valuers would look at the cost price of these items and check the marketable value. Such valuation becomes the sum assured of the policy. The insured has to bear the cost of such valuation report in addition to the policy premium. For artwork, the valuation costs are between ₹1,000 and ₹3,000 per painting. For cameras, the costs will be different.