Bharat Griha Raksha Normal House Insurance Presents Automated Sum Insurance: Ought to You Purchase? – Enterprise hours
High premiums are an important reason why many people do not take out home insurance. For this reason, the Insurance Regulatory and Development Authority of India (IRDAI) issued guidelines in January 2021 for the issuance of a standard home insurance policy called Bharat Griha Raksha (BGR), which is designed to cover residential real estate at affordable premiums.
The insurance regulator has mandated all general insurance companies to offer this standard insurance and therefore most insurers are offering this insurance cover from April 1st, 2021.
Check out the features of Bharat Griha Raksha insurance coverage and whether you should get it here.
What is insured in the policy?
Actual Damage: According to IRDAI guidelines, the general damage covered by the Bharat Griha Raksha includes fire, explosion or implosion, lightning strike, earthquake, volcanic eruption or other natural tremor, storm, cyclone, typhoon, storm, hurricane, tornado, tsunami , Flood and flood, landslide, rock fall, bush fire, forest fire and jungle fire.
The policy also covers damage caused by impact or collision with external physical objects such as vehicles, falling trees, planes, walls, etc.
In addition, the policy covers all physical loss, damage or destruction caused to the insured property by theft within 7 days of the occurrence and immediately of one of the insured events.
Ancillary costs: In addition to the actual damage, the policy also covers many ancillary costs that are often incurred in the event of major damage. It pays up to 2% of the damage amount for reasonable costs for the removal of rubble from the construction site.
“The policy pays up to 5% of the damage amount as an appropriate fee for the architect, appraiser, consulting engineer. In addition, the policy also pays for loss of rent and rent for replacement housing if the housing structure is not susceptible to livelihood leading to physical loss, ”said Pallavi Roy, Executive Vice President (Product Development), IFFCO Tokyo General Insurance.
Man-made disasters: Some man-made disasters are also covered by this policy, including riots, strikes, malicious damage, acts of terrorism and missile tests. “House protection used to come under the umbrella of the SFSP policy, which included terrorism as an optional cover. With the introduction of the BGR product, which is exclusively dedicated to home security, terrorism has become an integrated cover within the product, ”says Roy.
Standard coverage of home content unless signed out
In many cases, damage to the house usually also leads to damage to the household items. The BGR offers automatic coverage of the content. The sum insured for general household effects is automatically assumed to be 20% of the sum insured for the residential building, which is limited to Rs 10 lakh if the residential building is covered. If a policyholder does not want this feature, they have the option to opt out as a recorded choice.
In addition to the basic cover and the built-in covers, Bharat Griha Raksha offers two optional covers, namely (1) cover for valuables at the agreed value (under household items cover) and (2) personal accident cover for insured persons and spouses if an insured danger damages the house and / or Household effects and also leads to the death of one or both of them.
If the value of such items is significant in your home, you can give the details and opt for higher home content coverage. "If you want to insure valuable content such as jewelry and ornaments, you can do so with supplementary insurance," says Rishad Manekia, founder and MD, Kairos Capital, a registered investment advisor with SEBI.
“This insurance coverage can increase if you opt for a higher sum insured for household items and provide the details. An appraisal must be provided if the sum insured for valuables exceeds 5 lakh and / or a single item is worth more than 1 lakh, "says Subramanyam Brahmajosyula, Head of Product Development, SBI General Insurance.
By providing the information and submitting a valuation report, an optional cover for valuables at the agreed value is possible. "Valuables such as jewelry, silverware, paintings, works of art can be covered on an agreed value basis," says Roy.
However, if the selected sum insured is no more than Rs 5 lakh, submission of an appraisal is not required. The additional premium for these add-ons must not exceed 50% of the BGR basic premium.
Let us now consider the characteristics of the guideline according to the IRDAI guidelines.
Higher sum insured
Instead of the market value, the coverage under this policy takes into account the costs of restoring or replacing the insured items.
“Under the Bharat Griha Raksha policy, there is a mechanism by which one can obtain an insurance sum. The details of the policy state that for the policyholder's residential structure, the house including fittings and fixtures – carpet area of the structure in square meters multiplied by the cost of the construction period at the start of the insurance policy is used to calculate the sum insured, "says Rakesh Goyal, Director, Probus Insurance.
The sum insured can exceed this value, but not fall below it. “The construction cost rate is the prevailing construction cost rate for the home of the policyholder at the start of the contract. In the case of additional buildings, on the other hand, the amount based on the building cost rate applicable at the time the insurance commenced, ”Goyal adds.
As part of the BGR, many insurers offer insurance cover at affordable prices. For example, you can get an insured amount of Rs 1 crore at an annual premium of Rs 2,466 from Digit, which is effectively an annual premium of Rs 247 for every Rs 1 lakh insured amount. Spend 24,660 rupees on 1 crore rupee protection over a 10 year period.
|Premiums for Rs 1 crore coverage under Bharat Griha Raksha|
|insurer||Annual premium *|
|New India Insurance||3,000 rupees|
|Bajaj Alliance||Rs 2,714|
|ICICI Lombard||Rs 4,072|
|* Including GST; Source: PolicyBazaar.Com|
Advantage without underinsurance
There is no underinsurance for this product, a special feature of this policy. “This is a unique feature of this policy. This basically means that if the sum insured, which is calculated on the basis of the information you have given the insurer, is less than the actual risk value, then the difference does not affect the amount to be paid, ”says Brahmajosyula.
For example, suppose the area of your residential building is 100 m² and the cost of building the city is Rs 15,000 per m². By mistake you declared an area of 90 square meters and your home is insured for Rs 13.5 lakh instead of Rs 15 lakh. If there is damage that requires repair that costs you Rs 5 lakh, then the insurance company will pay you Rs 5 lakh.
Annual escalation of the sum insured in the long-term policy
The cost of replacing a building increases over time due to inflation, which means that 10 years later, building the house would be many times what it is today. To remedy this problem, the BGR policy has an automatic escalation function in which the sum insured is increased annually.
“For long-term contracts, say 10 years, there is an automatic annual increase of 10%. With a 10-year policy, the sum insured doubles each year until the end of the contract period (10% increase.) ", Says Tarun Mathur, CBO-GI, Policybazaar.com.
As this is a built-in feature, it will not cost policyholders any additional premium in the future. “The 10% increase in the sum insured per year is one of the worthy features of this standardized policy. Here, the sum insured increases automatically during the insurance period by 10% per year on each insurance anniversary without an additional premium by a maximum of 100% of the sum insured, "says Roy.
Daily escalation for the annual policy
The rise in prices is a phenomenon that occurs gradually, not just annually. In order to benefit from higher costs over the course of an insurance year, the BGR offers a daily staggering of the sum insured. With an annual policy, the sum insured increases automatically every day by an amount that corresponds to 1 / 365th of 10% of the sum insured at the start of the insurance.
What is excluded
However, while the policy covers most of the common types of damage, there are certain types of damage that are not covered. Damage in the exclusion list includes the loss, damage or destruction of electrical / electronic machines, devices, devices or fittings as a result of being run over, excessive pressure, short circuit, arcing, self-heating or leakage for whatever reason (including lightning strike). This exclusion only applies to the respective machine that has been lost, damaged or destroyed in this way.
Should you buy?
A standard household insurance product simplifies coverage and makes it easy for the policyholder to understand. Standardization is also forcing insurers to offer very competitive premiums. Since most of the features are the same for all insurers, it is easier to compare the premiums and choose a policy of your choice. Careful financial planning requires financial protection for valuable assets, and this policy is a great way to get that protection at an affordable price.
“Anyone who owns a home can consider buying this policy. A tenant can also take out this insurance against the possible loss of the general contents in the house due to natural disasters, fire or theft. Given the nominal premium of such policies, this is a great way to transfer your risk to the insurance companies, especially for those who live in hilly areas, floodplains or a high earthquake risk zone, etc., ”says Manekia.