MONEYSENSE CONSUMER EDUCATION
TOPIC: MAKING SENSE OF HOME INSURANCE How does Insurance work for me? Are all losses payable? SPEAKER: MR RUDI SPAAN
(PRESIDENT OF AMERICAN HOME ASSURANCE COMPANY, SINGAPORE)
Property Insurance
Buying a property is a major decision and probably the biggest investment for most. Naturally you would want to protect your investment from unforeseen circumstances such as fire. Then again the questions are, does your home policy work for you? Is your sum insured sufficient to protect you against total loss? What are the common exclusions in a home policy?
How much should I insure for my property?
Question of great concern to all home owners, whether you are a HDB or private home owner. Does your property insurance provide sufficient coverage for the cost of rebuilding or reinstating your apartment/house or will you be in financial strains to restore your home?
How much should I insure for my property?
Extremely important to ensure your property is insured for an adequate amount. Rule of thumb: Sum insured should reflect the cost of rebuilding or reinstating the insured property to its original condition or its equivalent at the time just before the damage occurred + professional fees/removal of debris (Buffer:510%)
How much should I insure for my property?
Sum insured could take 2 forms: Pre-determined amount or variable Pre-determined: Found in packaged building & contents policy Variable: Determined by policyholder. Responsibility of policyholders to insure at the full cost of rebuilding their damaged property.
How much should I insure for my property?
Should there be more than 1 property insurance purchased, most insurers will indemnify policyholder on a pro-rata basis of the claimable amount. The more policies you purchased does not necessary increase your coverage. Do refer to the individual policy wordings on coinsurance to understand how you will be indemnified should a claim arise.
Property Insurance for Private Apts?
For private apartment home owners, it is likely that the apartment block has been registered as a Management Corporation Strata Title (MCST) property. Management Corporation (MC) will insure the building and the common property against structural damage caused by fire. MC’s policy cover will restore the building structure to its predamage condition. Structure of a building: Common areas, pillars, columns, party walls, windows, external doors, floors, ceiling and roof excludes any improvements/renovations such as flooring or built in cabinets.
Property Insurance for Private Apts?
If your property is mortgaged to the bank as security for bank loan, the bank will normally require you to purchase an insurance coverage for the property known as Mortgagee Interest Policy (MIP). As a general guide to estimate the sum insured, you can refer to the replacement cost table for Private Residential Developments available on the General Insurance Association of Singapore’s website at www.gia.org.sg/consumerfaqs_fire.cfm
Property Insurance for HDB flats?
If you have taken a mortgage loan from HDB, it is compulsory to take up HDB Basic Fire Insurance to cover the building structure and standard fixture & fittings provided by HDB against fire and other perils. Excludes the common areas, renovations & improvements made to the HDB flat and all household contents provided by HDB. If your flat is mortgaged to a bank as security for bank loan, the bank will require you to purchase property insurance that may not cover damage to renovations or contents.
Insurance Cover for contents?
Property Insurance covers only the shell of your apartment. To protect improvements, household contents or personal belongings, a separate contents insurance policy is required. Many insurers offer “home insurance” to cover contents. Main differences could be as follows: a) Sum insured – “Pre-determined” amount or “variable” b) Covered perils – “Named Perils” or “all risk” c) Claims payment basis – “Actual Cash Value” or “Replacement Cost”
Insurance Cover for contents?
Sum insured could take 2 forms: - Pre-determined : Found in packaged policy - Variable : Geared more towards a customer who has valuable furniture and items. Home Insurance on actual cash value basis will indemnify an amount equivalent to the replacement cost of a stolen/damaged property at the time of loss less depreciation. Policy on replacement cost basis will indemnify the cost to replace an item on the present market with no deduction for depreciation.
First Loss or Average Loss Policy?
Home Insurance are either first loss or average loss policies. First Loss: Do not require full declaration of the total value of the contents & building. Payout will be up to sum insured. Average Loss: Insured must fully declare the total value of the home contents & building to be paid in full loss in the event of a claim. If not, averaging will apply.
First Loss or Average Loss Policy?
Example of Underinsurance: A building is insured for SGD 200,000. The actual cash value to reinstate the building is SGD 300,000. If the building was damaged by fire to the value of SGD 60,000 in repairs, the claims settlement would be calculated as follows: (Sum insured/ Value at risk) x Amount of loss (200,000 / 300,000) x 60,000 = Amount Payable: SGD 40,000 Review the insured amount for your property at least once a year or when renovations are carried out.
What to do after a loss?
In the event of an occurrence that may lead to a claim under your home policy:
a) take necessary measures to prevent and avoid further loss or damage. b) contact your insurer as soon as possible. You will usually be required to complete and require a claim form c) in the case of theft or any criminal act, lodge an official report with the police. d) do not make any admission, offers, promises or payment without prior written consent from the insurer. e) get ready these supporting documents which the insurer may require to determine the loss: - police report in the event of a break-in or theft at your residence - receipts if items of a certain value are lost or damaged, and - invoice of renovation done on the property
Examples of common exclusions
Loss or damage caused by termites, cockroaches, mice, or rats infestation to your home. Any accident, loss, destruction, damage or legal liability directly or indirectly caused or contributed by or arising from nuclear weapon materials. Loss of cash, currency notes, deeds, bonds, bills of exchange, cheque, securities for Money, stamps, manuscripts, drawings, models etc. Loss or damage caused by acts of terrorism. Loss or damage or injury arising from or contributed to by any dishonest, fraudulent, criminal, malicious or willful act or omission e.g. You left your door wide open and your contents are stolen.
What to consider when evaluating the various policy options offered?
It would be useful to consider the following: What are the additional coverage? Does the policy cover personal accident and liability, loss or damage to valuable or personal effects outside of home premises? Is it a first loss or average loss policy? Definitions of terms – how are risk defined in the policy? Different insurer define risks differently. Excess clause – The minimum amount you must bear for yourself for every loss which may differ for certain types of losses.
QUESTIONS & ANSWERS