No, a higher sum insured doesn’t mean you will get a higher claim settlement. There are some instances where a home insurance company can refuse to settle your claim even if you have a high sum insured or settle the lesser amount. Also, there are clauses like deductibles etc.; which you would have to pay before the home insurance company settles the claim.
Many times, over insurance, happens when the same item is covered under more than one policy. For instance, you buy a refrigerator and get it covered under a home insurance. You also get a content insurance from a company from whom you have bought a refrigerator.
Further, the other example of over-insurance might be an overvaluation or change in price over the years. It means you might have bought a comprehensive home insurance that covers your content as well. However, at the time when you purchased the items, it had a higher value, however, its prices have since gone down.
Remember, the purpose of home insurance is to give you financial coverage at the time of loss or damage. And, you would be paid as per the loss and the market value. With advancement in technology, appliances and devices have become cheaper, which in turn also reduce their cost of replacement.
However, just because you have a higher sum insured, it doesn’t mean, you will be able to get a higher claim settlement more than the actual loss. The home insurance company has its way to gauge the actual loss incurred, and therefore, shall be liable to compensate only for the market value. It means, even if you had purchased a comprehensive home insurance cover with a big sum insured, you would only get what is required to replace ‘that’ item. It means you will only get replacement value.
Also, if the insurance company would pay more than the actual loss, it would be against the principle of indemnity, as according to this, a policyholder should get what the actual loss is or less than that. In any case, it can’t be more than the loss.
In case of over-insurance, where the insurer settled only as per the market rate, the policyholder forgets that he/she had been paying higher insurance for the coverage which could easily available at a low price.
In order to avoid such a situation, it is necessary to ensure that you are not insured under different policies. It is worth noting when items are insured and from whom because you may be paying for a separate insurance cover when you already have insurance from its seller.
Last year, 30-year old Ravish Kumar bought a new house for Rs 50 lakh. He along with his wife furnished the house with costly appliances and bought some luxurious sofa set also. He purchased a beautiful silver Ganesh plate and placed it in his drawing room.
The destiny had its plans, and just after two weeks of shifting to their new home, heavy rainfall entered and damaged the house. Ravish had to incur major expenses as all its home content got wet. There was a total content loss of Rs 10 lakh.
As Ravish had a home insurance policy, he approached the insurer for the claim settlement. Here, the insurer asked for documents, like duly filled insurance form, valuation certificate, etc.; to initiate the claim.
Here, it was noted that Ravish had bought a content insurance to cover his silver plate which was also insured under jewellery insurance offered by a jeweler.
It means, Ravish could get the claim either from the insurer or jeweler. In any case, Ravish was not allowed to get more than the actual loss even if he had coverage for silver plate under two insurance policies. Though his sum insured was high, the claim was settled as per the market value only.
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