What is life without possessions like a house, a car, jewellery, that home theater system you’ve been waiting for so long, and those decorations, paintings, and the designer furniture? Once you’ve acquired them, you cherish them, but life does take a beating if any of these go missing, or stop working.
Unless you’ve been living the life of an ascetic, away from the world and all worldly affairs, (and perched atop a mountain), it is likely that you have at least some of these assets in your possession.
If nothing else, that laptop containing all your memorable moments, favorite movies, games, applications, and critical documents is worth more than your wardrobe at the moment. Also, how can we forget the all versatile smartphone? Life without it is unthinkable.
When these gadgets and assets hold this much importance, have you ever did anything to ensure that a loss of these assets does not affect your life?
Insurance as a Safety Cushion
You may take many measures to ensure the safety of the property from multiple risks, but no amount of effort can make them 100 per cent loss proof. Therefore, creating a bounce back cushion is also important, so that you can quickly overcome the loss of asset while absorbing the financial impact of it.
Property insurance is one tool which can help you create and maintain such bounce back cushion for you.
Types of Assets
There are multiple ways we can classify our assets, but the best classification will be the one more useful for the insurance objective. For insuring these assets all the assets can be divided in the following manner:
The valuation method differs for each asset, because of the indemnity principle followed in insurance. It states that the insured should not stand to profit out of the insurance proceeds, and thus, every year the insurer will have to match the insurance cover with the market value of the asset.
This basis will affect the type of insurance you can buy for the asset, and the sum insured for it. Even, your decision to buy insurance for certain assets will be affected by the valuation method used by the insurer.
Basis of Insurance Classification
So how exactly the classification affect your insurance choices?
Different terms are used in property insurance policies for the offered cover (valuation method) for the asset:
Depending on the type of asset and its usage any one of the above methods can be used for the asset valuation. For example, vintage cars, however old, can be insured at agreed value if they have been kept in good condition.
Similarly, different assets at different times will have different type and method of insurance to cover the risk of loss.
Best example can be the case of buildings:
– While under construction the insurance will cover the building on reinstatement basis; i.e. cost of material and labour is provided in the event of damage to the building before completion.
– Once complete the insurance can be taken either at depreciated value or reinstatement value.
In this case, you will receive full cost (material & labour) plus any inflation if the building is damaged by an insured peril. This is similar to the under-construction building. But, if you go for depreciation value basis insurance, your premium will be lower, and the claim will be settled after accounting for depreciation as well.
Stock in trade, however, is insured on market value (cost to the insured) without any depreciation.
Precious Items & Antiques (Art, Collectibles, etc.)
For any asset, which is unique, (like a painting or sculpture), and market value is not available, expert valuers can be appointed by the insurer to decide the approximate cost of the asset.
Usually, art insurance takes care of such assets. However, affordability of premium can be an issue in this case.
Since, we tend to own more than one asset, managing multiple policies can be difficult and cost prohibitive. Insurers offer comprehensive plans to resolve this issue, Home Insurance (householders’ policy), shop and office insurance, factory/warehouse insurance, etc. are examples of customized comprehensive policies which can be bought.
With so many options, it’s likely to feel overwhelmed. But online insurance advisors like SecureNow, really make buyers’ life easier, by advising the best options according to their possessions and needs. These advisors will also assist in the management of the policies and claim process.