DETERMINANTS OF HOME RISK PREMIUM
Home risk premium is calculated based on various factors. The
factors that majorly influence the determination of premium are:
Location: The location / area of the home is an important
factor. Based on the postal code, insurance companies can track claims made in
that location and use that information to calculate premium.
Amount and type of coverage: If insurance coverage is
purchased for a higher amount, then premium will also be high. The premium
amount also depends on the type of coverage taken by the policy holder.
Add on coverage: Different insurance companies provide different
add on coverage with building and content. This also has an impact on the
premium amount.
Replacement cost: Value of home and content - The premium
also depends on the amount required to rebuild the home in the event of a total
cost. This includes cost of structure, replacement of contents and covers
additional living expenses.
Age of building: The risk associated with old buildings is
high. Usually low premiums are charged to the newest buildings and high premium
is charged to old building due to the high risk factor. If the old building is
in a renovated condition, this will be considered when calculating premium.
Let-out: If the policy holder lets out the home on rent,
the premium will be expensive. This is because insurance providers believe that
tenants are less likely to look after the property as well as the owners.
Claims history: Claim history of the policy holder is one
of the deciding factors of the premium amount. If the policyholder has made a
claim in the past, he / she is more likely to claim in the future too and thus
the insurance provider increases the premium amount.
Other factors: Other factors like how close or far the
house is to the fire station, type of wiring, use of marble / granite stone,
valuables, interiors, etc. also play a role in deciding premium amounts.
HOME INSURANCE CLAIM PROCESS
Intimation of damage: The first step upon damage due to
peril, is to immediately inform the insurance company about the same.
Providing information: The policyholder has to provide all information
and policy details
Authentication: After that authentication of the claim
message will be communicatied to the applicant by the insurance company.
Appointment of Surveys: A survey is appointed usually in
the next 48 hours. The applicant has to submit all the relevant documents to
the surveyor
- Duly
completed and signed claim form
- Photocopy
of policy
- Copy of
FIR
- Final Report
of policy
- Copy of
all invoices, price lists and repair estimates.
FSR: The surveyor submits the Final Survey Report (FSR) to the
company along with the documents. This happens within 7 days of the incident.
Settlement: The claims department process the claim within 7
days from date of receipt of FSR
CALCULATION OF SUM INSURED
The value called ‘reconstruction value’ is considered while
calculating the value of the home for insurance. Market value of the home is
not taken into consideration when assess the value of the home.
The sum insured will be calculated by multiplying the
built-up area of the home with the construction value per square feet. Rate of
construction can be revised due to expensive material like marble flooring,
garden surrounded by wall, etc.
E.g. Square feet of home is 1000 and construction rate is
2000 per sq ft. the sum insured for the home structure thus is Rs. 2000000
(1000 x 2000).
CATASTROPHES & HOME INSURANCE
Insurance protects homes from natural disasters like
earthquake, floods, hurricanes, man-made disasters, etc. Generally, insurance
polices exclude these risks and hence the policy holder has to take catastrophe
insurance to protect the home from these risks.
Catastrophe insurance is different from other types of insurance
as it is difficult to estimate the total potential cost of insured loss in the
event of a catastrophe. Reinsurance and retrocession are used along with
catastrophe insurance to manage catastrophe risk.
Reinsurance is also known as insurance for insurers or stop-loss insurance. Reinsurance is the practice whereby insurers transfer
portions of their risk portfolios to other parties by some form of agreement to
reduce the likelihood of paying a large obligation resulting from an insurance claim.
Retrocession is the reinsuring of a risk by a reinsurer. Reinsurance companies cede risks under retrocession agreements to other reinsurers, for reasons similar to those that cause primary insurers to
purchase reinsurance. Retrocession is the reinsuring of a risk by a reinsurer.
