A look at the lessons the Chennai floods have taught us and what you can do to have your own safety ring in future

It’s not every day that a random post by Ramesh Karthik, a software engineer in Chennai, gets shared on social media 226 times. Not surprisingly, it struck a chord with everyone who read it:

“Till two days ago, I was getting worked up about my appraisal at office. I have completed seven years in my company and I am long overdue for a six-month offsite to San Francisco. My 2016 wish list includes upgrading my current four-wheeler to a luxury sedan and that much-awaited Istanbul holiday. I have been pulling the strings, taking the bosses out for cocktail nights, putting in extra hours… but this morning, I have other priorities. I am trying to hold on to my dear life. I have just half a bottle of clean drinking water left on my table. My kitchen is flooded, my stove is dank, and there is no power. My clothes are soaking wet. The wet matchstick can’t light the candle. If the apartment gate gives in to the flow of water from the floods tonight, the water can enter my ground floor apartment in any minute and that can mean the end of everything as none in my family know how to swim. I don’t care about appraisal, offsite, sedan or iPhone6. God, give me a safe place to stand, a warm bed to sleep and a hot meal to eat”.

The Chennai floods in December 2015 taught the world the lesson that when hu- 18 The Finapolis l JANUARY 2016 man beings throw common sense to the wind and get selfish, Mother Nature can give it back to us in a million-fold with her fury, nothing counts. Not the notes in your wallet, the Solitaries on your fingers or the number of followers on Twitter. It’s all about survival. About holding on to your breath, latching on that life support, waiting for that water packet from the rescue helicopter to land in your hands from the air, going after the food packet like the goal keeper in a game. Oh yes, life can take you from selfie to selfish in no time.

The calamity gave the message loud and clear. The only way to get back is to stay responsible and if you still manage to survive, a solid insurance plan is what can put you back on track. Insurance cover should not be the last resort to save your tax, but your first instinct to protect yourself against life’s uncertainties. Estimates suggest a loss of a whopping Rs 50,000 crore (as on first week of December) in the flood ravaged city. However, insured losses could be a fraction - less than 10 per cent of the total losses. This means that if you have not been insured, you have to start your life from the scratch. If you have been foresighted and got yourself insured, you could have claimed the full reimbursement.

Turn around, don’t drown: How to survive a calamity

Typhoons, hurricanes, droughts and earthquakes in different geographies of the world have made headlines throughout 2015. It has long been established that rise in the temperature of our planet is causing deep disturbances in atmospheric pressure which causes the El Nino effect, largely held responsible for the freak weather in Tamil Nadu that drowned Chennai recently.

The beach city and its neighbours were caught off guard. Over 280 lives perished in the floods in Tamil Nadu. An estimated 130,000 people were affected and reports peg the total damage of property and equipment at Rs. 50,000 crore. Rapid unplanned construction and heavy rains were blamed for multiple loss of lives.

A natural disaster has the potential to destroy lives. While emotional loss cannot be made up for with any kind of planning, but financial distress can be mitigated by prudent planning. The larger environmental challenges faced by the planet may be the subject of the recently concluded summit in Paris but you’d rather be safe than be sorry is the lesson that is blowing in the wind.

Table 1:Online term plans
Plan Category Key Feature Flagship Annual Premium (Rs.)
Reliance Online Term Non-linked, non-participating term insurance plan Claim to be settled in 12 days else nominee gets 6.5% p.a. for delay 15,995
Aegon Life iTerm Insurance Plan Term Plan (rider option available) 25% advance payment on diagnosis of Terminal Illness 16,259
Max Life Online Term Plan - Basic Life Cover Term Plan Optional Accident Benefi t Rider available 17,290
HDFC LifeClick 2 Protect Plus Non-participating term insurance plan Option to increase life cover on key milestones with multiple options 22,609

Here’s how we can prepare: Basics first

Whether it’s likely or not, the ultimate question of life and death comes to haunt us in wake of an impending calamity in a nearby region. Grim as it might be, let’s talk about death! It comes to everybody sooner or later but if it’s to be soon and untimely, it’s best to safeguard your loved ones against the loss of your income. By getting an insurance cover, you essentially transfer the risk of death or disease from you or your family to an insurance provider. The insurance provider charges a premium to you to bear this risk.

Insurance for individuals can be very broadly categorised as life insurance and general Insurance. Term plans are most sought after life insurance plans that guarantee certain sum assured to the beneficiary in case of the death of the policy holder. But benefits and conditions vary from policy to policy with respect to circumstances leading to death and other factors. So, it is important to compare plans and read the fine print before buying.

'It is imperative for people to buy insurance to cover all hard earned assets adequately, in terms of value and comprehensively in terms of coverage'
Narayanan, Chief Operating Offi cer Future Generali India Insurance Company Ltd.

This risk can be mitigated by paying an annual premium. The premium for a term policy of duration 30 years for a male of 28 years against a coverage amount of Rs 1 crore varies between Rs 6,887 – 23,244. The premium goes up with the age of the person insured on account of increased risk borne by the insurance provider. For example, the premium for a same policy for a male of age 40 years will vary between Rs 15,995-56,792 p.a. Table I gives you an idea of various online term plans for life insurance.

Head for cover

After talking death, let’s talk about life before and after a natural disaster and what can be done to quarantine yourself financially from these unforeseen risks.

You can seek protection from natural disasters by getting an insurance cover for your house, vehicles and for your business. Much of policies in the aforementioned categories provide protection against natural calamities such as fire, explosion, earthquake, lighting, flood, storm and in some cases even missile testing.

Your house is your most valuable asset and therefore the primary source of your financial strength. Be sure to insure it.

Table 2: Home insurance plans
Age of Property Type pf Property Plan Insurance Type (Crore) Sum Insured Duration Premium (Including Taxes) Particulars of cover
< 30 years Flat/Apartment Bajaj Allianz - My Home Insurance Plan Only Structure 5,000,000 1 Year 2,576 Structure Cover - Fire & Allied Perils
31-50 years Flat/Apartment L&T My Asset Primary Home Insurance Plan Comprehensive (Structure + Content) 50,00,000 + 3,50,000 + 3,50,000 + 1,00,000 + 50,000 + 2,50,000 1 Year 6,601 Structure Cover - Fire & Allied Perils + Content Cover - Fire & Allied Perils + Burglary Cover + Electronic Equipment + Electrical Appliances + Jewellery
<30 years Individual House HDFC ERGO Home Insurance Comprehensive (Structure + Content) 50,00,000 + 2,00,000 + 1,50,000 + 3,50,000 1 Year 4,166 Structure Cover - Fire & Allied Perils, Furniture Cover, Electrical Appliances, Total Content Cover - Fire & Allied Perils [Sum of Furniture & Appliances]

Reference note: The premium amount is based on location and age of the property and tenure of the insurance. The home insurance duration can stretch from 3 to 30 years and differs from policy to policy. The duration of the cover varies from plan to plan. While some offer cover on an yearly basis with the option for renewal, others offer a blanket cover for a fi xed tenure of 3, 10 or 30 years. The premium of the policy is more for a comprehensive cover that covers the contents such as electronic appliances, jewellery etc. Source: MyInsuranceClub

What should be the ideal amount for insuring the house?

The cost of home insurance usually depends on the cost one would incur to replace the house or its contents as covered under the policy and additional insured riders. A yearly valuation plays a vital role in home insurance to ensure that claim becomes an easier process!

Insuring an apartment of 1,000 sq. ft for Rs 50 lakh for 10 years will cost Rs 20,038, whereas including an additional cover of Rs 5 lakh for contents of the house will cost Rs 32,635. Table 2 gives you an idea of various home insurance plans.

What is covered in a home insurance policy?

The home insurance policy covers the building structure and contents, loss due to burglary/ theft, loss of jewellery or valuables, baggage loss, damage or loss of domestic and electrical appliances, damage to electronic equipment and other belongings like pedal cycles, etc.

The policy generally covers the structure of your home and contents against

  • Fire, lightning, explosion/ implosion
  • Riot strike, malicious and terrorist damages
  • Earthquake, volcanic eruption and other convulsions of nature
  • Storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation
  • Aircraft damage and missile testing operations
  • Impact damage by rail/ road vehicle and animal
  • Subsidence, landslide and rock slide

What is NOT covered in a home insurance?

The usual exclusions are willful destruction of property, any loss or damage to any property that is illegally acquired, kept, stored which is subject to forfeiture, any loss or damage by the insured and/ or insured’s domestic staff direct or indirect involvement in an attempted burglary, any loss caused by war, wear and tear, and/ or if the property was vacant for more than 30 days without prior notice to the company.

'The total liability in the region is estimated at Rs 4,000 crore, of which Rs 400 to Rs 500 crore would be on the account of motor claims. The rest of it would be mostly claims related to property'
Narayanan, Chief Operating Offi cer Future Generali India Insurance Company Ltd.

Any loss or damage suffered due to the following is treated as an exception and cannot be claimed:

  • Any loss or damage on account of loss of livestock, motor vehicles, pedal cycles, money, securities for money, stamp, bullion, deeds, bonds, bills of exchange, promissory notes, stock or share certificates, business books, manuscripts, documents of any kinds, unless specifically mentioned and valued
  • Consumable articles
  • Loose precious stones, jewellery or valuables, unless specifically mentioned and valued

Motor Insurance

Vehicles are expensive and highly depreciable assets and therefore it takes time to re-build them. One needs financial security before indulging in expensive assets such as cars and to rebuild such assets after a natural disaster can be great task. Motor insurance comes to your rescue here. A comprehensive motor insurance plan usually covers natural and manmade calamities. The former include hurricane, storm, tempest, hailstorm, inundation, cyclone, frost, rockslide, landslide, fire, shock damage due to earthquake, fire, explosion, lightning and flood. Man-made calamities include theft, housebreaking, burglary, strike, riot, accident, terrorist activity and damage during travel by road, rail, inland-waterway, or air.

Safety first

Greek philosopher Aristotle was of the view that, “The ultimate value of life depends upon awareness and the power of contemplation rather than upon mere survival”.

Although, Mumbai hasn’t seen recap of 2005 floods, Chennai has come as a grim reminder to Mumbaikars to be prepared. Reports say that scientists have predicted that the chances of Mumbai facing a floodlike situation has more than doubled till 2080 and losses could triple.

When a disaster strikes, physical safety, more than money matters, is of utmost concern.

What to do before a flood?

  • Avoid building in low-lying and flood prone areas unless these are elevated or reinforced safely
  • In the event of a flood warning, put electrical appliances on higher ground or upper floors
  • Install check valves in sewers to prevent floodwater to back up in your residence’s drainage system
  • Get in touch with local officials to find out if there are plans to construct barriers (floodwalls, levees and beams) in your area
  • Reinforce basement walls and waterproof it to avoid flood water from seeping in
  • Stay alert: Regularly scan radio, internet and television for information

Digitlise important documents through insurance repository

Insurance Repository offers a facility to digitize all your insurance policies and store them in a secure and online location.

The objective of creating an insurance repository is to provide policyholders a facility to keep insurance policies in electronic form and to undertake changes, modifications and revisions in the insurance policy with speed and accuracy in order to bring about efficiency, transparency and cost reduction in the issuance and maintenance of insurance policies.

Policy holders can access the electronic policies any time from their computer, mobile and tablet and track the policy details, renewal payments and initiate service requests.

All this can be done by opening an electronic insurance account (eIA). Opening e-Insurance account is very simple. Policy holders can walk in to any of the front offices of insurers or repositories and submit an application for eIA.

'e-Insurance will help to preserve the policy records and would help to track the history of the insured property'
Narayanan, Chief Operating Offi cer Future Generali India Insurance Company Ltd.

If flood is imminent

  • It’s crucial to stock up on drinking water, food, medicines and other basic supplies to last at least 15-20 days. Supplies are hit hard in areas under prolonged flooding. People in Chennai suffered greatly due to lack of clean water and food and had to rely on help from good Samaritans and military even after the water receded.
  • Relocate to higher ground. Do not wait for instructions to move.
  • Beware of drains, canyons, and other areas that get flooded suddenly. Such areas are most susceptible to flash floods
  • If you must, do not hesitate to evacuate
  • Move essential items to an higher floors

Make an emergency kit for all members of the family, which should include:

  • Battery operated radio, flashlight and extra batteries
  • Extra cellphone and fully charged spare batteries if possible
  • Candles and matches in a waterproof container
  • Knife, Shoes, Thick ropes and cords
  • Chlorine tablets (for purifying water)
  • Cash and important documents (Ration card, Voter ID card, Aadhar Card etc.)

If you think insurance costs a lot, try paying the price for not having one. With increasing dependence on technology, transport and communication devices, our need for bigger homes, cars, laptops, tablets etc has increased. And with life’s uncertainties looming large on us all the time, it is just plain good sense to do what it takes to mitigate the loss. India has woken up to health and life insurance. In 2012, Indian insurance was a $72 billion industry. Only 0.2% of the total populations of 1 billion are covered under Mediclaim, whereas in developed nations like the USA, about 75% of the total populations are covered under insurance schemes. While we try to play catch up on health and life cover, we must remember that with our lives tethered to the material things, general insurance is the need of the hour. With predictions that almost every Indian city is prone to become another Chennai when a flood occurs, the New Year is a good time to take that important step.

Written By: Deepak Yohannan and Team Finapolis

Posted by The Finapolis Thursday, January 07, 2016 12:46:00 PM


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