Home Insurance: Because home is more than just a physical structure
Your home is not just your safe haven, it is also perhaps your most expensive investment. Read this article to find out why just one kind of home insurance may not be enough to provide complete protection for your home. Find out how you can protect this investment.
Home. The word alone is enough to create a feeling of security, safety and happiness within us.
Your home is your haven from the rest of the world; it is where you come together as a family. It is full of things, big and small, that you have lovingly collected over the years.
The furniture that you bought with your husband after years of saving, the first television you bought as a couple, the bunk bed that you custom-designed with your kids’ inputs, the home-theatre system that has let you have many great family movie evenings…almost everything you own and have memories associated with is there together, in that one space that you call home.
Any damage to this home – however big or small – is bound to be distressing, right?
Just the thought of something happening to our home fills us with panic; we cannot imagine losing everything that we own and have spent years building bit by bit in one go.
Yet it does happen, and more often than you would think.
All homes need protecting
Every year, there are thousands of house fires in Singapore, leading to loss of homes and personal belongings. While the affected families have to deal with the emotional trauma of having their homes reduced to ruin, many of them will also incur huge financial losses, simply because they had not gotten their homes insured.
The purchase of a fire insurance policy is mandatory for anyone buying an HDB flat, a condominium, or a landed property.
If you own an HDB, you will have to use the appointed insurer and you will likely pay a couple of dollars a year for a 5-year plan. If you own a condominium or a private apartment, it is likely registered along with the entire block as a Management Corporation Strata Title property, which means that the Management Corporation is responsible for insuring the entire property. Landed property owners have the option of taking the fire insurance from any of the given providers.
This fire insurance policy covers the damage caused to your home’s external structure and the replacement of any original fixtures or fittings in the case of an HDB, and that of rebuilding the home in the case of a landed property (not its market value).
However, under the terms of the policy the damage could be caused by factors other than a fire such as lightning, standard explosions, earthquakes, bursting or overflowing water pipes amongst others.
Despite these inclusions, a basic fire insurance does not offer complete protection for your home.
The compulsory fire insurance policy does not cover the contents of your home, your personal belongings, nor any renovations that you may have carried out since the purchase of the home.
Which means that if you have, like many other Singaporeans, spent thousands of dollars renovating and furnishing your home, and then not taken out a home insurance policy to cover all of it, you could end up with a huge financial burden. The financial burden will only add to your mental and emotional stress of having lost everything in a fire.
So be pragmatic and make sure that you do have a good policy in place.
So what kind of protection does your home need? Click on the next page to find out the levels of protection home insurance can offer.
What kind of cover do you need for complete home protection?
To ensure complete protection for your home, you should be looking at three kinds of insurance:
- Building insurance, which covers the external structure of your home only. The compulsory insurance cover for the HDB’s falls under this category, i.e. – it only covers the damage caused to the structure and original fittings of the home.
- Home Contents insurance, which also covers your come contents as well as any renovations work that your may have carried out post the purchase of the home.
- Mortgage insurance, which covers the payments on your home loan, should something happen to you or your ability to make the payment.
A very basic home insurance policy such as Aviva Home Lite covers the following four aspects:
- Household contents: This includes all your material possessions within the home such as furniture, appliances, crockery, utensils, clothing etc.
- Renovations: This covers all fittings and fixtures installed after purchases such as bathroom fittings, built-in wardrobes, floor coverings and even your air conditioners.
- Personal legal liability: This covers any accidental injury or damage to a third person property caused in your home, such as someone tripping over a rug in your house and injuring themselves.
- Alternative accommodation expenses: This is usually in the form of a stipend to cover the cost of alternative accommodation while your home undergoes repairs (but this amount is subject to limits).
While their basic home insurance cover takes care of a number of eventualities, there are also high-tiered options available for those who want additional cover to include situations such as pet deaths, loss of personal papers, loss of personal money/credit cards/debit cards.
The kind of premium that you pay for your home contents insurance depends on the level of coverage you want. For example, Aviva’s home contents insurance premium can range from $53/year to $160.50/year, based on what all is included in the cover.
Adding an additional layer of protection
There is a third kind of insurance that should be taken out by home owners, and that is Mortgage Insurance.
Unlike fire insurance or home contents insurance (which protect your home and what is within it), the mortgage insurance ensures that the payments on your home loan continue in case something happens to you that makes you unable to repay your home loan.
It covers eventualities such as falling ill with a terminal disease.
For HDB owners, Home Protection Scheme (HPS) is offered to all who pay their monthly housing instalments via CPF savings. But it’s not compulsory and you can apply for exemption if you already have private life insurance in place.
If you decide to go for a private mortgage insurance, the premium for it depends on the loan amount. For example, under Aviva’s MyProtector-Mortgage the premium for a 25-year loan of $300,000 is $189/year*.
Unfortunately, you cannot put protective charms on your home (Harry Potter style) and keep it safe from all eventualities. However, what you can do is be prepared if something unfortunate were to happen.
You hope that you never have to use your building, home contents or mortgage insurance, but in the case something does happen you will find that it is invaluable to have one.
A comprehensive insurance cover for your home, its contents and the mortgage can help you and your family deal with the financial aspect of the crisis that results from losing a home and get you back on to your feet. Hopefully, with all the support you will soon start to build a home all over again.
*Premium shown reflects that of a male policyholder, non-smoker, 30 years old (at age next birthday), taking up a 25-year policy with a mortgage interest rate of 3% p.a.
Is your home protected? What kind of an insurance have you taken out? Do share with us in the comments section below.