Property insurance

Your home and the things in it are often the most valuable things a family owns. A fire, a flood or a burglary can wipe out years of savings in one night.

Property insurance protects against that. The booklet defines it as a "policy that provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft."

Read that carefully and you find four useful facts:

• It is for the owner or the renter. You do not need to own the house.
• It covers the structure (the building) and its contents (furniture, appliances and so on).
• It pays for damage and for theft.
• It reimburses you: it pays you back for the loss.

The basic insurance bargain (Chapter 6). Insurance is "a promise of compensation for specific potential future losses in exchange for a periodic payment called premium." The company providing it is the insurer; the person buying it is the insured or policy holder; the contract is the insurance policy, which sets out "the conditions and circumstances under which the insured will be financially compensated."

Kinds of property insurance named in the booklet:

Where it sits among the other policies in the same chapter:

Who regulates it. Insurance is regulated by IRDAI, which aims to protect policyholders' interests. Grievances about a contract of insurance go to IRDAI, not SEBI.

Names, amounts and policy terms are illustrative.

Anjali and her husband rent a flat in Kolhapur. They do not own the building, so they assumed insurance was not for them. Their belongings are worth:

The booklet's definition covers the renter and the contents, so they buy a renters insurance policy covering their contents against damage and theft, for an annual premium of Rs 1,800.

Two years later, heavy rains flood the ground floor. Water ruins the refrigerator, washing machine and furniture. Assume the policy covers flood damage to contents and the insurer assesses the loss at Rs 1,40,000.

Premiums paid over 2 years = 1,800 × 2 = Rs 3,600
Loss reimbursed            = Rs 1,40,000

Without insurance, the couple would have paid the whole Rs 1,40,000 themselves. The building's own damage is the landlord's matter, under his own policy as owner of the structure.

Chapter 6 (Insurance Related Products) lists property insurance among the insurance policy types, alongside life, personal accident, motor, health, travel and group insurance, and describes IRDAI's role. Expect: "a policy reimbursing the owner or renter of a structure and its contents for damage or theft is?" and "which of these is a type of property insurance?" (homeowner's, renters, flood or earthquake insurance).

• Renters can buy it too. The definition says "owner or renter".
• It covers contents, not only the building.
• Damage and theft are both covered by the definition.
• Vehicles are motor insurance, and luggage on a trip is travel insurance, not property insurance.
• Flood and earthquake insurance are listed as kinds of property insurance.
• Complaints about an insurance contract go to IRDAI, not SEBI.