Monday, 27 January 2014


Insurance is an agreement between two parties, namely the owner of a property (insured) and the insurer (insurance company), whereby the insurance company undertakes to indemnify the owner of the property the financial loss that the owner may suffer in case the property is damaged or destroyed by a cause for which the insurance policy is taken. Insurance is one of the ways to protect buildings against natural losses and vandalism. The types of coverage available include fire, consequential loss, personal property, public liability, casualty, and surety bonds, workers' compensation. The risks are covered only after the premium is paid and the policy liability is limited to the insured sum and for a specified time limit till the policy is kept alive.

In India, an insurance company has come out with a scheme for householders to cover various risks with a single policy protecting the members who permanently reside in the house, including domestic and electrical appliances. Another company covers the possessions against different disasters, including fire, natural accidents, explosion of gas cylinder, bursting of water tanks and pipes, impact damage caused by vehicles, riots, strikes, malicious acts, burglary and mechanical breakdown of domestic appliances and so on.

Title Insurance Policy:
Under this policy, the policyholder is protected from losses arising from defects in the title. Based on the enquiry the insurance company determines whether the title is insurable. This is the best defence of the title. The company will defend any suit based on an insurable defect and pay claims if the title proves to be defective.

Fire Insurance Policy:
This policy covers against direct loss or damage to the property due to fire. The actual amount, which the insured will receive depends on the actual loss suffered. Full reinstatement can be received only if the property had been adequately insured by payment of appropriate premium. If the building had been underinsured, only proportional sum will be paid. The value of the property is arrived at the reinstatement cost irrespective of any other value. Normally, the value of foundation is excluded.

Sometimes, an old building which is destroyed completely by fire cannot be reinstated in its previous condition due to restriction by changes made in the local municipal laws. In such a case, the insurance company may not compensate the insured of the loss suffered by him on the building cost that is not cleared. If loan is availed while purchasing a property, the mortgagee insists on the insurance cover of the property.

Earlier, the value of personal properties in a house used to be only 25 per cent to 50 per cent of the value of the house. At present, the value of personal properties in a house has increased substantially.

Public Liability Insurance:
This policy covers the damages that may be inflicted on a third party by the act of omission or commission The cost of insurance can be reduced in several ways like accepting higher deductible amount, installing security devices, installing fire alarms, and by comparing various terms and conditions issued by insurance companies.

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