At Rs 6 a day, insure your house against earthquakes

A house destroyed by an earthquake can be rebuilt by setting aside about Rs 6-12 a day. That’s the cost of buying home insurance, which most people consider an unnecessary expense – a priority that needs to be reconsidered in the aftermath of the Nepal earthquake.

“The premium for a standard fire and perils cover, which includes natural and man-made calamities, is as low as Rs 60 per Rs 1 lakh. However, less than 1% of the people who can afford it have home insurance,” says Tapan Singhel, MD & CEO of Bajaj Allianz.

Home insurance covers rebuilding the structure, not the value of the property. Reconstruction costs range from Rs 1,800 per square foot for a no-frills structure to Rs 3,500 per square foot for a finer construction. A 2,000 square foot house can be insured for Rs 35-70 lakh, for which the premium will be roughly Rs 2,100-4,200 a year.

The cost can be lowered if the policy is purchased for a longer term, say, 10 years, because of discounts offered by insurance companies. However, the cost of construction could go up during this time. Taking an insurance policy for the contents of a house costs less than home insurance.

“We, as Indians, feel that nothing will happen to us. Even if we buy, it is sold to us by banks while giving home loans and is for a very short tenure. So there is a greater need to buy it,” says KK Mishra, MD & CEO of Tata-AIG General Insurance.

Asia suffered losses of $52 billion last year due to natural catastrophes and man-made disasters and only 10% of this was covered by insurance, according to a recent report by Swiss Re. Floods in India in September 2014 destroyed houses and caused a loss of $4.4 billion.