The Insurance Board is slashing the insurance premium for residential houses worth up to Rs10 million to 0.04 percent. From January 15, a homeowner will have to pay Rs4,000 for a Rs10 million insurance policy. Currently, the premium is 0.139 percent.

The board revised the premium by issuing a new directive on property and house insurance. The lower premium is expected to encourage more homeowners to insure their properties, the board said. The insurance premium for the house and assets in the home has been decreased to 0.1 percent from 0.28 percent.

The insurance policy covers damage caused by fire, wind, rain, earthquake, landslide, cave-in, lightning and explosion. The policy does not offer coverage for damage caused by vandalism or terrorist attack.

As per government rules, structures valued up to Rs10 million are considered to be residential houses while structures costing more more than that are considered to be commercial buildings.

Currently, buyers of homeowners insurance are mostly building companies and homeowners who build houses with bank loans. Homeowners who do not finance their houses do not insure their property against natural disasters, fire, theft or other mishaps.

The board has been mulling to simplify homeowners insurance since the 2015 earthquakes that damaged 800,000 houses. Following the disaster, 17,658 claims for Rs18.40 billion were filed with non-life insurance companies.

Insurance Board Chairman Chiranjibi Chapagain said the premium had been slashed almost 65 percent. The board has separated insurable properties into 548 groups with separate premiums, he said.

Insurers can sell insurance policies under headings such as general type, short term, floating property, declared property and rehabilitation. Based on the type of risk, insurable properties are divided into seven sub-divisions. The premiums for these sub-headings range from 0.15 to 0.85 percent, according to the board.

The board has classified 12 types of property insurance under very general risk, which includes damage to construction materials and art and crafts. The general risk type covers 110 goods including utility items of restaurants, laundry, schools, electricity substations and airport terminals, among others.

Medium type risks relate to 76 items at spinning mills, soft drink plants, green houses, bakeries and distilleries. High risk category includes 147 items including enamel, electronics, packaged foods and raw leather, among others.

The remaining three categories are hazardous risks. They involve chemicals, tobacco products, furniture, corrosive elements, petroleum products, celluloid items and fire crackers, among others. Premiums range from 0.5 to 0.85 percent of the value of the asset.