Insuring your home adequately
Insuring your home seems easy: Pay the fire insurance that the Housing and Development Board (HDB) or your bank requires and forget about it until next year. There is a lot more than fire that can damage your home, though, so you need to consider doing more to protect yourself adequately.
THE NEED FOR HOME INSURANCE
It might seem like you would only need fire insurance – and even that only because it is mandatory for HDB homeowners and others with a mortgage. And since the number of fire-related calls actually declined by more than 10 per cent last year, according to the Singapore Civil Defence Force, even fire insurance might seem a bit superfluous.
Yet there is a lot else that could go wrong. If there is a fire in a neighbour's flat, your home could be damaged too. If the hot water heater starts leaking just after you leave for work, your home could look like a wading pool when you get back. Or burglars could take the expensive gadgets you bought and left at home. While the chances of these or other problems may be low, they definitely do happen.
And that is where home insurance comes in. Your home is where you keep most of your belongings, from clothes and cookware to jewellery and laptops. Home insurance is designed to reimburse you for the cost of repairs or replacement if anything happens to your home or what you keep inside it.
WHAT YOU REQUIRE
If you live in an HDB flat or have a mortgage, the fire insurance policy you had to get should cover the building and original fixtures. Home insurance can cover everything else – furniture, clothes, other things you own, care for pets who are injured, expensive renovations, and a place to stay while your home is being repaired.
While home insurance sounds straightforward, there are several variations. You need to consider them carefully, since everything you insure costs more.
A basic home insurance policy will cover the physical structure and the personal property inside your home
A broader comprehensive policy can cover you against far more. Insurance company AIG, for instance, says that you can add on insurance to cover the contents of your home, unexpected events such as a flood or theft, valuables, worldwide personal effects, liability to third parties, identity fraud, a bicycle or even an extension of product warranties.
You may also need to choose between an Insured Perils Policy, which provides coverage against losses from specific incidents such as fire, explosion, theft and natural disasters, or an All Risks Policy, which provides wider coverage except for exclusions that are specifically listed in the policy.
HOW MUCH INSURANCE
Compared to the value of your home and everything in it, policies can be relatively inexpensive.
Online comparison website Value Penguin found in a study of 16 insurance companies that the average price of home insurance here is about S$154 a year for a four-room HDB flat. These basic policies cover "named perils" such as losses from fire, theft, and other specific events, with coverage averaging about S$30,000 for home contents and about S$50,000 for home renovation costs. You can also get all risk policies or higher coverage by paying more.
Beyond getting a basic policy, though, there is more to consider.
One factor is to make sure you choose the right deductible. Almost every policy has a deductible, which is the amount or percentage that you have to pay if something happens. The higher the deductible, the more you will pay if there is a calamity — and the lower the annual cost of the insurance. The deductible should be as high as you can afford, since the likelihood of a problem is low and you can save on insurance costs with a high deductible.
Another factor is to make sure that you are adequately insured. You should start by estimating the value of your flat and everything in it realistically, then buy an insurance policy that covers you adequately. If you under-insure, you will get paid less than the cost of replacement. Take a look at the various sub-limits, too, since there may be maximums on cash, jewellery, bikes, or other items.
You should also update your insurance coverage periodically. For many homeowners, insurance is "set-and-forget." We buy a home insurance policy when we buy our flat and never update it, even though costs go up and we buy new things. Doing an inventory every year or two and updating your policy before it automatically renews can be worth it.
Along with updating the policy, you should consider updating your insurer. Prices do change over time and there are plenty more options than before. The easy way to check is to use online comparison sites such as ValuePenguin or Insurance Market. You can also check the websites of more than a dozen insurance companies here that offer home insurance.
SMALL SPENDING WHICH GOES A LONG WAY
Even though fire insurance might have seemed like enough, you will thank yourself for getting more if a problem ever happens. Spending a little on home insurance now, even for a basic policy, can deliver big benefits in the future.
