Home Insurance in Nepal: Reading Your Flood, Landslide and Liquefaction Cover

Most people find out what their home insurance really covers on the day they claim. That is the worst possible day to read the policy for the first time. The encouraging part is that the answer is not hidden somewhere clever. It sits in two places: the list of perils the policy covers, and the exclusions. Read those against each other and most of the argument is settled before it starts.

One caution first. Nothing below is a rule that applies to every policy sold in Nepal. Household property cover is written differently by different insurers, and the perils, deductibles and exclusions change with the wording. Use this as a map of how these policies are usually put together, then hold it against your own document, line by line.

Start with the perils schedule

Most schedules name their perils in a table. Fire and lightning are almost always there. Explosion usually sits alongside them. Storm, tempest, flood and inundation often appear together, sometimes lumped onto a single line. Earthquake tends to be handled differently: present, but as an extension you pay extra for, and carrying its own deductible. Landslide and rockslide are the ones most often missing altogether.

What that table tends to look like in shape, before you compare it with your own:

• Fire and lightning: covered, with a deductible per claim.
• Explosion: usually on the same footing as fire.
• Storm, tempest, flood and inundation: often grouped, sometimes listed as separate lines.
• Earthquake, including resulting ground movement: frequently available as a paid extension, with a deductible that may be a share of the sum insured rather than a flat amount.
• Landslide and rockslide: quite often absent.
• Contents: normally a separate line, with its own sum insured and its own deductible.

This is an illustration of the shape of a schedule. It is not a real policy and not any particular insurer's wording.

A peril can fail you in more than one way. It can be marked as excluded, or it can simply not appear in the table at all, and absent means no. Or it can appear with a deductible of its own, which changes what you actually collect even when the claim itself is accepted.

Then read the exact words printed on your schedule, not the words your neighbour uses for the same thing. One wording may name flood on one line and inundation on another, or bundle storm, tempest and flood together. If what came down the hill was mud and water after days of rain, whether you describe that as flood, inundation, storm or landslide can matter enormously, because the claim turns on the term in the document. When you notify the insurer, quote the policy. Do not paraphrase it.

On landslide and rockslide specifically, assume nothing. Whether either appears at all, and whether they come as an extension you have to buy, varies by insurer, by location and by policy year. Some schedules name rockslide but not landslide. Some insurers decline hillside risks outright. A policy that covered landslide on a house in one district tells you nothing about yours.

The land exclusion that decides the claim

Now go to the exclusions and read for one thing: land. Most household property wordings insure the building and its contents, not the ground the building stands on. Damage to the site itself, the land, retaining walls or the slope is often excluded or handled separately, even when the peril that caused the damage is covered.

So for a monsoon landslide, the practical question is not only whether landslide is a covered peril. It is also whether what you lost was the insured property or the land beneath it. A house pushed off its foundation and a garden that slid away can be treated very differently under the same policy. That distinction is decided by the wording, not by how bad the loss looks from the road. If the loss is to the land rather than the insured building, you may find the peril was covered and the claim still does not pay, or pays only for the part of the damage that touched the structure. This is the single most common place where expectations and settlements part company, so read the clause before you assume either way.

Liquefaction: read the earthquake peril and the land clause together

Liquefaction is ground failure after seismic shaking. Ground that behaves like a solid can start acting like a liquid, and whatever is sitting on it moves. It is not usually listed as a peril by name, so there is no line in the schedule to point at.

That leaves two questions. Does earthquake, including resulting ground movement, appear as a covered peril on your schedule? And is what you are claiming for the insured building or the site under it? Answer those two and liquefaction stops being a mystery category of its own. Answer only the first and you may still be disappointed.

Sum insured, basis of cover, and the average clause

Your sum insured should be set on the basis the policy intends. Usually that is either reinstatement, meaning what it would cost to rebuild, or market value, meaning what the property would sell for. Those produce very different numbers for the same house, and choosing one in your head while the policy states the other causes trouble at claim time. Check which basis your schedule actually states. If it is not clear, ask before you pay.

Underinsurance works through the average clause. In plain terms, if the sum insured is below the value the policy requires, the insurer may settle only the same proportion of the loss. A flood claim can be perfectly valid and still be reduced this way. The reduction is not a fixed percentage written into law anywhere. It is arithmetic that follows your own policy condition, which is exactly why that condition is worth reading now rather than in the middle of a disaster.

Who gets the cheque when the house is mortgaged

If you took a home loan, the lender is often named on the policy as loss payee or mortgagee. The settlement may then be issued to the bank first and applied against your loan balance rather than handed to you. That is normal practice, but it changes your cash-flow plan after a disaster, because rebuilding money and loan repayment suddenly depend on the same payment. Check the policy and the loan document together so you know which way yours runs.

Renewal, and carrying the mortgagee clause forward

Renewal is where all of this repeats. Lenders generally want the cover kept in force for as long as the loan runs, so expect the bank to be named again every time you renew, and expect to have to pass the fresh schedule to the lender yourself. A mortgagee clause does not normally update on its own.

Before you file the renewed policy away, check a few things. Is the lender still named, and at the address the bank uses now? Is the sum insured the same figure as last year, and does that figure still reflect what it would cost to rebuild the house at today's prices? And are the perils you actually asked about still on the schedule, or did an extension quietly drop off at renewal? An old sum insured carried forward year after year is one of the quiet ways people end up underinsured, and the average clause is what turns that into a reduced payout after a flood.

Keep this separate from mortgage redemption insurance. That is a credit-life style product which typically repays the outstanding loan if the borrower dies. It is not property damage cover, and it does not stand in for home insurance against flood, landslide or earthquake. The two do different jobs and neither substitutes for the other. Product and lender terms vary, so read your own documents rather than assuming what they do.

Documents and deadlines when you claim

Claims are usually assessed by an assessor or loss adjuster appointed by the insurer, and that assessment largely drives the settlement figure you are offered. You are not required to accept it silently. If the numbers look wrong, ask what was measured, how it was valued, and against which sum insured.

Typical document requests include a completed claim form, your policy or schedule, ownership and valuation papers, dated photographs, repair or rebuilding estimates, the assessor's report, and a local government disaster damage report where one exists. If the property is mortgaged, the lender may want its own set as well.

Deadlines are printed in your wording, and they work in two stages. First, how soon you must tell the insurer that a loss has happened. Then, how long you have afterwards to submit the supporting documents. Find those lines now, while nothing is broken. A late notification is one of the few grounds on which an otherwise valid claim gets refused outright. Keep dated photos, receipts and estimates as you go, because reconstructing them months later is far harder than taking them on the day.

Relief is not an indemnity

Government or NGO relief is not an insurance payout and does not come out of your policy. Whether receiving relief affects a claim is something to ask your insurer and your lender directly, because it can turn on the wording and on the loan terms. Do not assume relief stands in for insurance either. It is usually far smaller than the cost of rebuilding, and it is not designed to make you whole.

Where to complain

Most insurers run an internal grievance channel, and it usually makes sense to use that first while keeping a written record of every exchange: dates, names, what was promised and what was actually paid. That record is what you will rely on if the complaint goes further.

Beyond the insurer, insurance complaints in Nepal go to the sector regulator. Regulators get reorganised and contact routes change, so check the current complaint process on the regulator's own website on the day you need it rather than relying on an old form, phone number or office address someone gave you years ago.

What to do this week

Pull out your schedule and your wording. Write down which of flood, inundation, landslide, rockslide and earthquake actually appear, and whether the building, the contents, or both are insured. Find the land and site exclusion and read it properly, because that is the clause that decides monsoon claims. Check whether your sum insured matches the basis the policy states. Note whether the deductible for each peril is a flat amount or a share of the sum insured. Note the notice period. If the property is mortgaged, confirm the lender is still named and that the cover runs alongside the loan.

Then, if something is missing that you want, ask your insurer in writing what it would cost to add. That conversation is cheaper before the monsoon than after it, and it is the only reliable way to know what your own policy covers.

The document says the same thing whether you read it in September or at two in the morning while water is coming in. One of those gives you time to do something about what you find.