THE General Insurance Association of Malaysia wishes to clarify certain issues raised in the letter "Beware of the hidden clauses" (NST, April 3) to help consumers understand the coverage provided by a fire insurance policy. First, a fire insurance policy is a legal contract between the insured and the insurance company. The protection accorded to the insured is stated in the fire insurance policy and the general principles of insurance law are applicable.

We fully agree with N.S. of Pasir Gudang that consumers should be constantly reminded to read and understand the scope and protection offered in their insurance policy. This way, the possibility of being caught by surprise in the event of a loss occurring is eliminated.

Second, the fire insurance policy is a policy of indemnity, which means any assessment of loss or damage to the insured premises is intended to put the insured back to a position just before the loss.

Therefore, in the case cited, the cost of repainting of the house is in respect of that part which was damaged by flood waters only — nothing more or less.

Third, policyholders are constantly reminded to ensure that the properties they want to insure are adequately insured. Sometimes, this is not done for the sake of saving on insurance premiums.

In the case of a house, the insured value should not be less than the market value or rebuilding cost of the house, excluding the cost of land, but taking into account any additional renovations that may have been made over the years.

If you are unsure of your property value, you can consult your insurer or property agent. House owners are advised to check and review the insured value of the property when renewing the policy.

If the property is insured at lower than its market value, the insured is deemed to "self-insure" the difference and, in the event a claim is payable, the total amount payable by the insurers will be reduced proportionately.

As to the point that there was no explanation on the calculations of this, we are of the view that, as a consumer, the insured has every right to request the insurer to inform him of how the calculations were made on the amount of claim payable.