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Most of us don’t consider home insurance necessary, thinking that the fire insurance we bought with HDB or the insurance we had to get when we took a loan with the bank is adequate. But as we will see, those don’t cover everything.
SCDF reported that the number of fire-related incidents caused by unattended cooking and electrical fires increased in residential homes last year, up from the year before. Just this month, four people, which included two children, were taken to hospital when a PMD fire broke out in a Sembawang flat.
A PMD fire broke out in a Sembawang flat at the end of Nov 2021.
Image courtesy of Dr Lim Wee Kiak
As we hear more similar cases arise in Singapore, it’s probably a good time to reassess the importance of home insurance. And with our home as one of our biggest assets, protecting it seems like an obvious decision.
In this guide, we explore the coverage you can get from home insurance versus the coverage you get from standard fire insurance as well as look at the considerations to think about if you decide to go for a home insurance scheme.
1. There are differences between fire insurance, mortgagee interest policy and home insurance
Say you already have fire insurance or a mortgagee interest policy as required by the bank where you are taking up a home loan from. Is it still necessary to get home insurance? If you are looking to have greater coverage, beyond structural and fittings/fixtures damage, then yes.
For those taking an HDB loan, you would already be required to take up the HDB Fire Insurance Scheme handled by FWD. The insurance is valid for a 5-year period and you will have to renew it every 5 years as long as you have an outstanding loan. It covers fire damage to the building, structures, fixtures and fittings provided by HDB and its developers.
Here’s a look at how much the 5-year premiums cost and the sum insured for HDB’s fire insurance:
| Flat Type | 5-year Premium (Includes &% GST | Sum Insured |
|---|---|---|
| 1-room | $1.62 | $29,000 |
| 2-room/2-room Flexi | $2.71 | $48,700 |
| 3-room | $4.87 | $60,400 |
| 4-room | $5.94 | $82,000 |
| 5-room/3-Gen | $7.13 | $97,300 |
| Executive/Multi-Gen | $8.10 | $106,200 |
| Studio Apartment | $2.71 | $48,700 |
For those living in Management Corporation Strata-Titled (MCST) properties, the fire insurance is handled by your Management Committee (MC) and usually covers property damage caused by a fire. It is unlikely to cover any improvements or renovations done by the homeowner. In the event your property is damaged by a fire, the MC will make a claim on your behalf and use the amount to reinstate the property.
Homeowners taking a bank loan may be required by the bank to take up a mortgagee interest policy against any outstanding loan you have with the bank. This protects the financial interest of the bank rather than you since all the insurance payout will go to the bank in the event that you are unable to service the loan due to property damage.
So if you are servicing a bank loan and own a condominium (a MCST property), you are likely covered by the fire insurance policy taken up by your MC as well as the mortgagee interest policy required by the bank.
Because of the basic coverage of fire insurance, some homeowners take up an extra home insurance to provide additional protection for their renovation works e.g. carpentry works, built-ins as well as their home contents e.g. furniture, appliances and furnishings.
If you will be renting out your home, getting a home insurance policy can help alleviate the financial costs to replace damaged furniture or appliances caused by your tenants. If you are a tenant, you may just need a home insurance policy that covers home contents and personal belongings to protect you based on terms in your lease agreement and from personal liability.
2. You will have to consider between two main types of home insurance policies
Image courtesy of Pexels
There are essentially two types of home insurance policies—insured peril and all-risks.
An insured peril home insurance policy covers specific disasters, such as fire, bursting of pipes, lightning, burglaries, natural disasters like earthquakes and floods etc.—these are some regular ‘perils’ as listed in an insured peril type policy.
An all-risks home insurance policy is more comprehensive (and expensive), offering a wider range of coverage as well as protection against accidental damage or loss. That is not to say all-risks policies cover everything; they do have their own exclusion list that you will need to read through to determine what can or cannot be claimed.
No two policy will have the same exclusion or inclusion list. So read up on the terms and conditions before taking up a home insurance policy.
Here’s a simplified example to help you understand how each type of policy works. Picture this scenario: Your guest accidentally spills red wine on a prized antique in your home while espousing the sublime qualities of a painting on the wall.
If you bought an all-risks home contents policy, breathe a sigh of relief because it will cover the damage. If you bought an insured peril policy, it is likely you will never speak to your guest again since the insured peril policy isn’t going to cover accidental damages like this. You can only make claims from an insured peril policy in instances where your antique gets stolen, gets damaged from a fire or flood, or is hit by lightning for example.
3. Not all home insurance policies cover the same things
Every home insurance policy is different, so do read up on what you will need. Here are a few common types of coverage under home insurance policies:
- Protection of home contents and renovations: These include furniture, furnishings and appliances as well as personal belongings like money, valuables or important personal documents. It will also include improvements or additions done to your home such as electrical wirings, TV feature wall, built-in cabinets or flooring.
- Personal accidents: Some policies will also cover accidents leading to injuries involving members of your household and occured in the premise of your home.
- Cash allowance: Certain policies will also provide a cash allowance so you can get basic items in the event that your home is damaged or becomes uninhabitable for a certain period of time.
- Alternative accommodation: If your home gets damaged, you will be able to claim for expenses from hotel stays while repairs are undergoing.
- Loss of rental income: If your rent property becomes uninhabitable, you will be compensated for your loss of rental as a landlord.
- Pets: If you have furry friends at home (dogs or cats), consider home insurance policies that will be able to provide payouts for the accidental deaths or injuries of your pet.
- Third-party loss/damage and personal liability: This provides a payout and covers you against personal liability in the event that the fire or flood started from your home spreads out and damages your neighbours’ properties. It can also to apply to injuries or deaths sustained by non-household members living in your property.
- Emergency home assistance: This provides a small sum payout for emergency events that require you to request for a locksmith, plumber, electrician, etc.
- Removal of debris: This will cover costs incurred from having to remove debris from a home before repairs or renovations can start.
- Home quarantine: You get payouts if you or any of your household member are ordered to serve a quarantine by the government.
- Cyber insurance: This covers you from things like cyber fraud, cyber extortion and identity theft.
4. Make sure you aren’t under or over insured
Image courtesy of Unsplash
In order to determine which home insurance policy to get and whether the sum insured in the policy is adequate, it’s a good idea to get a qualified property valuer or a quantity surveyor to determine the cost needed to reinstate your home after damage i.e. the replacement cost. It is recommended to get this assessment renewed every three years to keep the costs up to date. Some insurance policies will have in-house engineers who will be able to provide an assessment of your home once you sign a policy with them.
Knowing this amount prevents you from under or over insuring. The former will mean you won’t be able to get the full payout necessary for repair works if your policy isn’t on a ‘first loss’ basis.
Say your percentage of under insurance is at 25%, you will need to bear 25% of the cost of your repair works. However, you will not be penalised if your policy is written on a first loss basis, where payout is based on the sum insured.
Being over insured isn’t a great option either as it will mean you are paying more premiums than necessary.
The General Insurance Association (GIA) provides a useful guideline to determine how much it will cost to reinstate your home after damage. You will need to know the construction floor area (CFA) of your home (obtained from the developer of your property) as well as the construction cost of home, which you can get an estimate here.
Read more about estimating the sum insured here.
In terms of the value of your home contents, this is where it gets a bit murkier. As the total value of your household contents is declared to determine the sum insured, there isn’t a need to list down every item you own. Most policies tend to have standard home contents package with various limits you can select from.
However, for more valuable items (jewellery, works of art, antiques, stamp and coin collections, etc), you may wish to itemise them in your policy so that they would be insured on the agreed values with no deduction for depreciation. Keep your receipts (preferably in digital form) so as to make it easier for claims if necessary.
>> See how a burnt HDB flat in Toa Payoh gets a new lease of life
5. Get an overview of various home insurance policies in Singapore
This list is not exhaustive and is meant to provide a general overview of the insurance policies available in Singapore.
| Insurance Provider |
Building Coverage |
Home Contents Coverage |
Renovations Coverage |
Personal Liability |
Premium |
|---|---|---|---|---|---|
| Sompo | $80,000 for Cosy plan | $20,000 for Cosy plan (valuables should not exceed 1/3 of contents sum assured) |
$80,000 for Cosy plan |
$750,000 | $96.30 for standard (insured perils) |
| AXA | Based on sum insured | For valuables, 1/3 of the sum insured of the contents or $7,000 per article for their all-risks policy |
25% of the sum insured for their all-risks policy | $500,000 | Depends on sum insured |
| MSIG | Based on sum insured |
$50,000 for standard plan |
$75,000 for standard plan |
Up to $1,000,000 | $118.77 for standard plan |
| Aviva | N.A. | $35,000 for Lite plan |
$75,000 for Lite plan |
$250,000 for Lite plan |
From $69.40 for Lite plan |
| HL Assurance | N.A. | $100,000 for silver plan |
$100,000 for silver plan |
$500,000 for silver plan |
$20 monthly before 7% GST |
| Etiqa TIQ | From $29,000 to $2,000,000 depending on home type |
From $15,000 to $150,000 depending on home type |
From $20,000 to $1,000,000 depending on home type |
From $500,000 to $1,000,000 depending on home type and whether you are homeowner or tenant |
From $32.95 |
| Income | Up to $100,000 for HDB flats ($200,000 for HDB jumbo flats) |
$30,000 to $160,000 depending on home type |
$40,000 to $300,000 depending on home type |
$500,000 | From $45.51 for a one-year coverage |
6. Read the fine print
Always do your due diligence and read up on the terms and conditions before signing up with a home insurance policy. Here are some things to take note of:
- Take note of the exclusions in your policy. Common exclusions include wear and tear or gradual deterioration, wilful act you or your household member e.g. leaving your door wide open resulting in a break-in, as well as loss or damage caused by pests and insects.
- Determine if it’s a first loss or average loss policy. As mentioned, the payout in a first loss policy is based on the sum insured (even if the actual loss is greater) and does not require a full declaration of the total value of the contents and building. For an average loss policy, the insured must fully declare the total value of the home contents and building to be paid in full loss during a claim.
- There may be certain time frames to keep in mind e.g. the time taken to report an incident or the time taken to complete the repair.
- Some policies will take into account the wear and tear of the item insured, deducting an amount from the cost of repair.
- Most policies will also not cover loss or damage while your premise is undergoing construction or reconstruction, so take note of that if you are thinking of insuring against potential damages caused by your contractor.
- Certain policies may not pay for claims if your home is unoccupied for a period of time.
- For tenants and landlords, consider taking up dedicated home insurance policies catered just for you as they will provide different forms of coverage. For instance, Sompo has a separate home insurance policy for tenants and landlords. See their HomeBliss policy for more information.
This article is meant to serve as a guide and not meant as financial instruction. It is also not affiliated with any insurance providers. You are recommended to seek out professional advice before making the decision to purchase an insurance product or policy.
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