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Reduce that pain arising from damage or loss of property

Thursday October 25 2018

A modern living room.

A modern living room. PHOTO| FOTOSEARCH 

LUKORITO W JONES
By LUKORITO W JONES
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Theft and burglary are common occurrences in many residential areas, especially in urban centres. The 2018 Economic Survey released by the Kenya National Bureau of Statistics shows that crime has almost doubled over the past three years.

At the household level, many Kenyans will tell stories of how they lost their valuables such as electronics, kitchen appliances and jewellery to thieves.

Yet, according to Pesabazaar co-founder and director Calleb Karegyesa, for just Sh3,000 a year, homeowners can ensure their valuables to the tune of more than half a million

shillings.

Pesabazaar is an online portal that allows Kenyans not only to purchase insurance, but also to compare the rates and terms of different insurance agencies.

The firm, which was started by Mr Karegyesa and Mr Prashanth Srinivas three years ago, seeks to make insurance cheaper by cutting out agents. It offers policies by firms such as Jubilee, First Assurance, UAP, Occidental, Geminia, Britam, Fidelity Shield and AAR.

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Contents insurance, Mr Karegyesa says, is a policy that indemnifies an individual for damage to, or loss of, their personal possessions inside a home.

BEST SELLING POLICIES

“Contents insurance is one of our best-selling policies. With the policy, a tenant or house owner can rest easy, knowing that they will get compensation should anything happen to their furniture, television, home theatre, curtains, carpet, cooking appliances, beds, mattresses, refrigerator, washing machines and basically all valuables in the household,” Mr Karegyesa says.

“The policy does not only cover against theft, but extends to accidental or malicious damage, fire, lightning, earthquakes, riots, and strikes, water damage and floods. In the last few years, the rains have been a menace and we have experienced an uptake of our policies due to the damage caused by floods. Policy inquiries also rise around the December festive season due an increase in homebreak-ins,” he adds.

Contents insurance also contains all-risk cover that extends coverage to personal items that are often temporarily taken out of the home by the policyholder. They include items such as mobile phones, tablets, travel bags/briefcases, jewellery and sunglasses/spectacles and photographic equipment such as cameras.

A burglar about to break into the house.

A burglar about to break into the house. PHOTO| FOTOSEARCH

The all-risk cover, Mr Karegyesa explains, gives protection to the insured movable items even when loss and damage does not occur within the household.

“I usually advise people that instead of taking a stand-alone cover for, say your mobile phone or camera, it is more prudent to take a contents insurance cover that will include the phone, together with other household items,” he says.

However, some contents insurance covers do not provide cover for theft by employees and relatives. In corporate or commercial insurance, there is a specific cover for this policy, known as fidelity guarantee.

Most contents insurance policies also come with a free work-injury benefits acts policy, commonly known as WIBA. Brought into being as an Act of the Parliament, WIBA is a policy that covers your domestic employee against accidental bodily injury, permanent or temporary disability, accidental emergency, medical expenses and loss of life.

“If you take a home contents insurance policy with a WIBA extension and your house-girl, for instance, is unable to carry out her duties due to an accident or injury at the workplace, her medical expenses will be taken care of up to the stated limit, and you will be reimbursed for the inconveniences that might occur. In the case of death of the employee or permanent disability, the insurance company will issue compensation up to eight years of the employee’s salary,” Mr Karegyesa explains.

OCCUPIER LIABILITY

For the smart insurance shopper, a contents insurance might also include a free occupier liability.

Occupier Liability, according to Mr Karegyesa, is a statute codified into law that specifies a responsibility by those who occupy a building to bear any liability that might arise from accidents caused by defective or dangerous conditions on the premises. This responsibility does not only extend to visitors, but also to people trespassing on the property.

“Say a visitor comes into your home and, while going to bed upstairs, they slip on a loose tread or wet floor and tumble down and get injured in the process. Should that visitor decide to sue you for their medical expenses and inconveniences caused by the accident, the occupier liability cover will help cater for the costs of the suit and the settlement fees,” he says.

If you live in your own home, then you may just be interested in adding owner liability to your cover. Just like occupier liability, owner liability provides cover against claims by any member of the public who suffers an injury following an accident on, or linked to, your premises.

Homeowners might find contents insurance included in their property insurance package.

“Sometimes referred to landlord’s or homeowner's insurance, such a policy covers residential buildings, fittings, perimeter walls, outbuildings and swimming pools — where applicable. It covers damage from fire, theft, earthquake, flooding, lightning, collision with vehicles or damage caused by falling trees, riots and strikes. Some insurance companies in Kenya will also cover rent receivable in the event that the landlord loses rent income due to the occurrence of the risk as insured for up to one year,” Mr. Karegyesa says.

According to quotations provided by Pesabazaar, insuring a building worth Sh10 million will cost you Sh10,000 in annual premiums.

A building worth Sh5,000,000 will set the owner back 5,000 shillings annually. Such a cover might provide for the cost of alternative accommodation in the event of loss and special perils. The owner/landlord is covered for loss of rent for up to 12 months arising from the insured event.

“As you can see, the premiums demanded are quite low compared with the value of the building. Yet many Kenyans dismiss insurance without considering property insurance package. “Sometimes referred to landlord’s or homeowner's insurance, such a policy covers residential buildings, fittings, perimeter walls, outbuildings and swimming pools — where applicable. It covers damage from fire, theft, earthquake, flooding, lightning, collision with vehicles or damage caused by falling trees, riots and strikes. Some insurance companies in Kenya will also cover rent receivable in the event that the landlord loses rent income due to the occurrence of the risk as insured for up to one year,” Mr. Karegyesa says.

According to quotations provided by Pesabazaar, insuring a building worth Sh10 million will cost you Sh10,000 in annual premiums. A building worth Sh5,000,000 will set the owner back 5,000 shillings annually.

Such a cover might provide for the cost of alternative accommodation in the event of loss and special perils. The owner/landlord is covered for loss of rent for up to 12 months arising from the insured event.

FINANCIAL SETBACK

“As you can see, the premiums demanded are quite low compared with the value of the building. Yet many Kenyans dismiss insurance without considering the great financial setback that a risk such as fire can cause. In the blink of an eye, a person’s largest portion of their net worth could disappear just like that,” Mr Karegyesa points out.

While looking for home insurance, M. Karegyesa says, that it is important to compare various policies to get the best deal. This will involve keenly going through the terms and conditions of the different policies to determine what is covered, and to what extent.

“At Pesabazaar, we have created an online platform where consumers can easily compare the rates offered by various insurance companies. We also offer free professional advice and have broken down each policy and its merits to enable our visitors to choose tailor-made insurance packages,” he says.

Since insurance relies heavily on the principle of utmost good faith, the client’s household contents are not necessarily inspected when they are taking a contents insurance policy.

A written declaration of the contents to be insure is enough, Mr Karegyesa states. Where possible, you are supposed to provide receipts for items such as mobile phones, a television, etc. Expensive jewellery might necessitate a valuation by a professional. For buildings, a valuation is mandatory, to curb fraud.

In the event of loss or damage, you must to inform the insurer immediately, after which you are required to file an official report at the nearest police station. Where the insurance company suspects fraud, it usually sends a representative to assess the damage or probe the theft.

The compensation accorded to the insured might be reduced to cater for depreciation, especially when it comes to household electronics. A small percentage of the suffered loss, known as excess, will also be borne by the insured.

“Excess,” Mr Karegyesa explains, “is a way of accepting a small risk yourself. This amount is usually indicated in the policy. Say you bought a television for Sh50,000 two years ago and insured it, then it accidentally fell to the floor, got damaged, and was written off. The insurance company might decide that due to depreciation, the TV’s value is nowSh45,000. However, the sum awarded to you may be lower, say, Sh42,000. The Sh3,000 is the excess. Knowing that you will bear a part of the risk will make you careful."

***

Protection packages just for professionals in real estate sector

Valuers, architects, lawyers, engineers, real estate agents and other professionals involved in the real estate sector can benefit a great deal from professional indemnity insurance.

According to Mr Mr Raymond Momanyi, the general manager at online insurance firm Pesabazaar, such a cover, more commonly known as errors and omissions (E&O) insurance in countries like the US, insulates professionals against charges of professional negligence.

“An example of a situation in which a personal indemnity policy might come to the rescue is when an architect’s design is found to be faulty, or when a client incurs a loss after investing in a venture based on a valuer’s or quantity surveyor’s professional advice,” Mr Momanyi says.

He adds that the cover also protects against loss of documents and dishonesty by employees.

PERFORMANCE BOND

Though technically not an insurance policy, a performance bond is sometimes required from a contractor who whose bid for a construction project is successful.

The performance bond, which is issued by a bank or insurance company, is a surety bond that guarantees the satisfactory execution and completion of the project.

In the event that the contractor is unable to finish the construction or his services are deemed as sub-par, the client can then claim the performance bond by up to the value of the unfinished work.

For a contractor, Mr Momanyi says, a public liability policy is usually taken to protect from claims that may arise due to an accident that may occur to a third party as a result of the construction process.

"If, for example, a brick falls from a construction site and hits a vehicle or a passer-by, the costs of the claims therein will be covered by the public liability policy,” Mr Momanyi expounds.

A contractor can also get the Work Injuries Benefits Act policy, WIBA, for his/her employees. This policy, Mr Momanyi says, will cover the employees at the construction site against death or injury, hence ensuring continuity of work.

SOPHISTICATED MACHINES

Another useful policy for contractors is the Contractor’s Pland and Machinery (CPM) policy.

“Contractors usually employ very expensive and sophisticated machinery as part of their work. If any of these machines were to break down or get stolen, they would suffer significant financial loss. CPM covers against such risks,” says Momanyi.

Mr Momanyi adds that instead of contractors acquiring several insurance policies for a single project, it would serve them better if they instead signed up for the all-inclusive contractors’ all-risk policy.

He says, “The contractors’ all risk policy not only covers the assets and workers, but also protects the contractor in case he/she gets sued by a client complaining of shoddy work. Any claims arising during the defects liability period will also be catered by the contractors’ all-risk policy.”

He further adds that for those seeking to build their homes, they should ask for proof that their contractor is sufficiently insured for the project.

“If your contractor does not have insurance, a claim arising from the project may cause the firm to become insolvent and thus unable to complete your project,” he advises.

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