Understanding your home insurance coverage

A recent survey shows that the majority of homeowners in Singapore are not fully aware of home contents insurance.

Singaporeans spend a fortune buying and renovating their properties, but are often ill-equipped to protect their investment in the event of a mishap.

A recent online survey by AIG Asia Pacific Insurance, which polled over 1,200 Singaporeans and permanent residents aged 18 to 55, found that one in 10 respondents were unaware of HDB’s fire insurance policy, while 50 percent had no idea what the limits of coverage were.

“HDB’s fire insurance scheme is the basic fire insurance cover for your flat. It is mandatory to purchase the policy once you take up an HDB housing loan,” said Elsepth Sia, Director of G’Insurance.

“However, it only covers the cost of restoring damaged internal areas built and provided by HDB, excluding household contents provided by HDB or its approved developer,” she added.

Cause for worry

AIG’s survey also revealed that 75 percent of respondents believe all fire insurance purchased from financial lenders will compensate losses or damages to their property and possessions arising from fire, water or other unforeseen events. However, this type of policy only covers the home’s main structure in the event of a fire.

“This (finding) is especially worrying, as unexpected accidents such as fire, water damage or theft can cause damage to much more than just the structure of your property,” said AIG’s Head of Personal Property, Fiona Xu.

In Singapore, it is not mandatory for property owners to buy additional fire insurance, so they have to opt for a more comprehensive policy to protect their personal property.

Back in February this year, Minister of State for National Development Desmond Lee highlighted the issue in Parliament, and urged owners to apply for greater coverage.

“I encourage all owners to ensure their properties are adequately insured against damage caused by unfortunate accidents like a fire. It would be prudent to do so,” he said.

Xu recommends that property owners purchase a home contents insurance policy, which covers major renovation works, alternative accommodation, personal belongings, and even repairs to a neighbour’s damaged property, for which you may be liable.

The level of coverage required will depend on the type and size of the property:

HDB flat

HDB flat owners can purchase such insurance plans from companies such as AIG, NTUC Income, AXA, AIA and Prudential. They complement the fire insurance scheme and helps them better protect their home contents, renovated items and personal belongings from unexpected mishaps.

While there are many solutions in the market, AIG is offering an SG50 special by giving away complimentary one-year home contents insurance for those receiving the keys to their new or resale HDB flats in 2015.

Private apartment

For private properties such as condominiums, apartments and town homes, the basic building structure and common areas are typically maintained and covered by the Management Committee of Strata Title Plan or MCST. As such, insurance cover for renovated interior items, home contents, personal belongings and valuables will usually suffice.

Landed home

For landed properties, homeowners would need both fire insurance and home contents insurance. While fire insurance covers the building structure, home contents insurance covers personal items and valuables in the home.

There are different types of home contents insurance landed homeowners can choose from, so they can purchase one customised to their needs, such as protection for art pieces.

Accidents are more common than you think!

Despite the benefits being clear, only 34 percent of Singaporeans and PRs have applied for home contents insurance, according to AIG’s survey. In contrast, 36 percent have not applied for such insurance, while 24 percent do not know about it.

This is troubling considering that fire, water damage and theft are the most common risk exposures to homes in Singapore, noted Xu.

AIG’s claims data reveals that fire damage accounted for 37 percent of claims, while water damage accounted for 21 percent, and theft, 11 percent.

Figures from the Singapore Civil Defence Force show there were 2,888 residential fires last year, in both public and private homes. The top five types of residential fires involved rubbish chutes and bins, unattended cooking, discarded items, household contents and electrical sources.

In fact, the highest claim paid out by AIG for home contents insurance to date is close to $95,000 for fire damage.

Commenting on this particular case, Xu said, “The fire started because of an electrical fault in an HDB flat. The payout covered major renovation works, home contents and alternative accommodation, to name a few. If the homeowner did not have home contents insurance coverage, he would have been left significantly out of pocket.”

Others may not be so fortunate. In AIG’s survey, 52 percent of respondents said they are ill-prepared to rebuild their homes in the event of a fire, flood or other disasters, while 24 percent feel they will struggle to adjust their current living standards should there be a need to reconstruct their homes or undertake major repairs.

Paying a premium

Sia explained that the premiums you pay for home contents insurance does not depend on the size of the house, but on the amount insured.

“Every plan differs in coverage, premium, and the sum insured. As such, we as advisers, will find out the client’s needs first before advising them,” she said.

To choose the coverage that best suits your needs and budget, Sia’s advice is that it should reflect the cost of renovation, home contents, as well as fixtures and fittings you want to insure. This means that owners of larger properties are more likely to apply for higher coverage, as they may have more home contents and spent more on renovations.

Interestingly, respondents who took part in AIG’s survey said the top five items they wanted to protect are jewellery, computers, furniture and furnishings, air-conditioners and audio-visual equipment.

However, policy holders should take note that this insurance will only indemnify up to the limit stated in the contract. So if the total cost of items surpasses that ceiling, you will not be able to recoup your losses if something happens. In such cases, you may want to increase your insured amount, but it would result in higher premiums.

Nevertheless, subscribing to home contents insurance is unlikely to burn a hole in your pocket, as policies for public and private housing only cost a respective $70 and $300 on average, noted Xu.

“The crux, though, is that homeowners get peace of mind, especially when they leave their homes unattended while working full-time or travelling for a holiday.”

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