What kind of Home Insurance do you need?

When you’re forking out a large sum of money to purchase, renovate and furnish your home, it can be tempting to remove home insurance from your list of must-haves in order to shave off the additional cost.

But is this the best of ideas? Definitely not – experts recommend that you get some sort of coverage, however minimal so that you won’t be left unprotected in the case that an accident does occur at home.

HDB Fire Insurance vs Home Insurance

You might be thinking: wait a minute, aren’t I already covered under the mandatory HDB Fire Insurance scheme?

That’s true, but what many homeowners don’t know is that the Fire Insurance scheme only covers damage to the physical structure of the flat – it doesn’t allow you to recover any costs attributed to your renovations and/or home furnishings.

So let’s say there’s been a fire at home (touch wood)! A homeowner who is only covered under the HDB Fire Insurance scheme can only claim for the losses related to the physical structure of the flat.

A homeowner who’s covered under an enhanced home insurance scheme, on the other hand, will be able to claim for losses related to the physical structure, renovation works, physical household items and personal belongings.

Bearing in mind that 16 buildings in Singapore have recently been found to have cladding that does not adhere to fire-safety standards, we think it’s better to err on the side of caution.

Types of Home Insurance available

Home insurance policies are typically classified as either Insured Perils Policies or All Risks Policies. The former provides homeowners with coverage against losses from a specified list of incidents such as fire, explosion, theft by forcible entry, natural disasters, and the like.

The All Risks Policy, on the other hand, affords homeowners with wider coverage and is applicable to all scenarios with the exception of certain predetermined exclusions.

What type of losses can be claimed under home insurance?

As a general rule of thumb, insurers will not reimburse homeowners for losses related to damage caused by insects, damage inflicted during renovations, intentional and willful harm to your property by family members, and general wear and tear of your home.

For those who have jewelry, art, or other expensive items at home, you can purchase home insurance that will cover you against the losses of theft or damage to your valuables.

Depending on the specific policy you purchase, there will be a limit as to how much your insurer will pay out in the event of a claim. As a benchmark, Aviva offers three home insurance policies (Home Lite, Home, and Home Plus) which will pay out a maximum of $35,000, $50,000 and $100,000 respectively for loss of valuables.

What is the “average clause” included in home insurance policies?

If your home insurance policy comes with an “average clause”, this means that your payouts are subject to the value of your property (as opposed to the amount you’ve insured it for). This can get a little confusing, so here’s an example to help illustrate the point:

For example, the value of your residential property is $1,400,000, but you’ve insured it for $1,000,000. If you’ve suffered $600,000 worth of losses due to whatever reason, your insurer will not pay out the full sum of $600,000.

Instead, you’ll get a payout of approximately $428,571, which is calculated based on the formula below:

Payout ($428,571)=Loss ($600,000) Sum Insured ($1,000,000)Value of Property ($1,400,000)

Is Home Insurance expensive?

Similar to life insurance plans, the premiums you’ll have to pay for your home insurance will climb in accordance with the insured amount and claim limits. That having been said, it’s not costly to get a basic plan from a provider such as NTUC income.

Bukit Batok. Picture: iProperty

If you’re looking at home insurance for HDB flats, NTUC Income’s yearly premium for their Standard plan ranges from $35 to $75 based on the size of your flat; if you’re living in private property, you can expect to pay between $121 to $355 for your Standard plan.

You’ve already spent so much time, effort and money on renovating and furnishing your home – so it’s worth it forking out that extra amount to make sure that you’re protected in the case of an accident.