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Published in Mint on 20th Jan 2015, Written by Abhishek Bondia

Why should my place of residence affect the premium amount of my motor vehicle insurance?

Several insurers now charge different rates for various cities as road quality and driving behaviour vary by city.
If you see underwriting practices in developed countries, the pricing formulae are far more complex and vary significantly by insurer. Large-scale data analytics do establish correlation between claims and place of residence, occupation, colour of car, education and so on. Accordingly, insurers give due weightage to these factors while pricing the risk. In India, such underwriting practices are at a nascent stage. For instance, one of the insurers gives an extra discount for people over 45 years in age.
Could you throw some light on the tax benefits of a health insurance policy?
—Chandresh Parekh

Premium paid towards health insurance is eligible to be deducted from total income of an individual. The amount eligible for deduction is calculated as per section 80D. Herein, the aggregate amount paid for self, spouse and children should not be more than Rs.15,000. An additional deduction of Rs.15,000 is available to maintain cover for parents. In case the people covered are above 60, the eligible amount increases to Rs.20,000.
If I were to take a three-month travel insurance policy, can I extend the tenor when needed?
—Soraine Chabbra

Yes, it is possible to extend a policy. Generally, for a single trip, most insurers allow a maximum duration of up to six months. Do note that if you incur a claim during the original policy period, the insurer might refuse to extend the policy. It is recommended that to the extent possible, you should keep sufficient provision in your original policy itself for marginal delays. In case you are a frequent traveller, you may want to consider an annual multi-trip policy.
To take a home insurance, on what parameters is the valuation of the property done?
—Dhirendar Agarwal

Standard fire and special perils policy could be taken for residential homes. Valuation for fire insurance could be done either on market value or reinstatement value basis. Under the market value concept, the original cost of the home is taken as base. Thereafter, standard depreciation is deducted for the age of the property. The resultant figure is considered to be the value of the house. Under the reinstatement value, the current market cost to construct a house of similar age and specifications is considered to be the value. In the latter concept, it is critical that the homeowner reinstates the house, else the claim is not payable. Under the market value concept, reinstatement is not necessary for claim settlement.
Do note that a higher sum assured on the policy does not entitle the policy holder to a higher claim.