Climate change: Why Indians should look at home insurance more seriously

Climate change: Why Indians should look at home insurance more seriously

A home is in all likelihood the most expensive asset purchase people make during their lifetime. However, when it comes to adequately protecting this asset, we tend to be targets of optimism bias. It is no surprise that home insurance penetration is just about 1% in India. This is in stark contrast to countries like US, UK, France, Australia and China that have home insurance penetration in the range of 90-97%.

If we look at the data on natural disasters in India, we would realize that the incidence of such calamities has risen significantly. Climate change and its impact on our lives is becoming a reality sooner than we had imagined and it is important to understand these risks in a more realistic manner.

While India is among the most disaster-prone countries in the world, the frequency and intensity of extreme natural calamities has gone up significantly.

According to a report by CSE and Down To Earth, climate change-induced natural disasters destroyed around 410,000 houses in 2022 alone. On an average, four cyclones affected India each year between 2010 and 2019 and the country has seen an alarming 32% increase in cyclones and severe cyclones between 2015 and 2019.

These calamities not only affect livelihood but also cause real damage to properties and livestock worth billions of dollars.

Urban flooding: A real threat to homes

The problem of climate change and the natural disasters that it induces is not limited to coastal areas alone. Urban flooding in India has become a reality due to rapid urbanization, illegal encroachment and poor drainage systems with regular flooding events being witnessed in the last 20 years in major cities like Bengaluru, Delhi, Mumbai, Chennai, and Kolkata, among others. An optimism bias dissuades us from adequately protecting our assets. For example, we assume fire, cyclone or floods affecting our homes is a highly unlikely event. While it is true that natural disasters are a low-probability event, what many don’t realize is that these are also high-impact events that can significantly affect your finances.

Take for instance the claim made by a Digit Insurance customer on the floods in Bengaluru last year. The insured lived in a triplex villa located in a posh locality in Bengaluru. During the floods, nearly all the 58 villa properties of the residential society were submerged when a nearby lake overflowed and resulted in blockage of the main drain. The water stagnated for three days causing severe damage to the villa property valued at 10 crore. The floods caused severe damage to not only the building structure, but also the doors, fittings, furniture, electrical appliances, among others. The assessed loss of the claim stood at 45.7 lakh, which was paid by the insurer.

Jewellery to furniture: Cover for everything

A home insurance is not taken just to protect your home from natural calamities. You can take a structure-only cover to protect your home from natural calamities like earthquake, floods, cyclones, storms, etc, and also against perils like fire, vandalism, riots, terrorism, among others.

One can also protect all the contents of the house like jewellery, furniture, artefacts, electrical appliances, among others. This specially makes sense to renters who would otherwise not want to take a full home insurance, but only cover their contents.

One can also take add-on covers for enhanced protection. For example, one can take an additional living expense cover and get reimbursed for expenses related to hotel stay, storage cost of household items or any movers and packers used for alternate accommodation. Similarly, by taking a “minor acquisition” add-on, one can receive the claim for any content bought or changes or additions made to the home after buying the policy. A Tenant’s Liability cover can also be taken by a tenant or renter to protect themselves from any legal liability that may arise due to any damage caused to surrounding third-party property or homeowners’ property.

Home Insurance is affordable

One crucial misconception that we deal with on a daily basis is that home insurance is expensive. Contrary to that, it is quite cheap. Generally, the premium for a ‘building only’ cover for a house costing 80 lakh can cost 1,680-1,800 per year , or 4.60-4.93 per day. A comprehensive cover for the same sum insured may range from 2,800 to 3,000 per year ( 7.67-8.22 per day).

Taking a home insurance is not merely about protecting the physical structure or contents of your house. It is also about safeguarding the memories and dreams that you have built.

Vivek Chaturvedi is CMO and head of direct sales, Digit General Insurance.

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Published: 13 Dec 2023, 09:45 PM IST

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