The Concept & Advice on Property Insurance

Mr. Gerard Colaco: Property insurance too is not compulsory. If you have no meaningful property, you do not need property insurance.

A number of youngsters today, well qualified, landing jobs in India at a salary of approximately Rs 3 lakhs per annum. They may be working well away from their hometowns. Most reasonably good Indian companies provide them with comfortable accommodation. Such individuals have virtually no property and mostly live out of a suitcase. This is a classic case of not needing property insurance. Of course if they own a vehicle, insurance of that vehicle is compulsory under the motor vehicle laws.

On the other hand, take the case of a person who owns an apartment in India. There are two aspects to an apartment. First is the absolute right you acquire to the area situated within the four walls of your individual apartment. Second, there is the undivided right and interest that you acquire in the land on which the apartment is built and also in its common areas and facilities. This is a joint right you hold with the other apartment takers.

Property insurance is relevant to both these aspects. You must insist that the association of apartment takers or co-operative society that runs the apartments, insures the entire structure of the building and also vitally important equipment such as transformers and electrical fittings, diesel generator, pump set and if possible, even the lifts. In case there is any structural or other damage to the building or its vital equipment, you are protected.

Few people are aware of just how cheap such insurance is. Let me give you a practical example. An apartment complex having 29 apartments, the estimated value of the building and its essential equipment was Rs 3.25 crores, and taking out insurance for this sum, about three years ago. The premium worked out to be Rs 22,000/- for the first year. Therefore, on the average, an apartment owner paid approximately Rs 759/- as premium per annum. There was no claim of any sort. The second and third year's premiums were drastically reduced by the insurance company, to approximately Rs 18,000/- and Rs 16,000/- respectively. Thus, it works out to just about Rs 552/- per apartment owner per year.

In addition, if you happen to be living in the apartment and have furnished it reasonably well, and have expensive gadgets like a washing machine, fridge, TV, music system, microwave oven, etc., a basic householder's policy against fire, theft and breakdown should be useful. Do not take this insurance if you are renting out your flat, only if you are actually living in it. Such householder's insurance is once again quite cheap. I will be surprised if a basic policy costs more than Rs 1,300/- per annum.