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With a homeownership rate of 87.9%, Singapore has one of the highest home ownership rates around the world. And given the high price of properties in our country, our homes are likely to be the single largest asset that forms our net worth for many of us.
Given the value and importance of our home, it makes sense that we should be looking to protect it as well as we can. One way to do so is to ensure that we have the right insurance policies that cover our homes against various types of risks including fire, flood, burglary and theft.
The Different Types of Risks Our Homes Face
Even in Singapore, a country with a low crime rate and no natural disasters (e.g. earthquake), having a well-protected home is not something that we should ever take for granted. According to SCDF, there were a total of 1,054 fire calls in 2020 for residential properties, which represented about 56% of all fire calls received by SCDF. The top three types of fires in residential premises are caused by unattended cooking, discarded items and electrical.
One common risk these days highlighted by SCDF are fires involving power assistant bicycles (PAB). In 2020, the number of cases involving PAB doubled from 13 in 2019 to 26 cases in 2020.
Beyond just the risk of fire, other common risks that our homes may face would include pipe bursts or explosions which could damage the fixtures and furniture in our homes.
I Already Have HDB Fire Insurance. Is That Enough?
Not insuring your home is risky as it is. What could be equally risky is thinking that our homes are adequately insured when they’re not.
For example, one common misconception that I have encountered among HDB homeowners is thinking that they don’t need to purchase any additional home insurance because they already bought the mandatory HDB fire insurance policy when they took their HDB loan. The HDB fire insurance plan is a requirement under the HDB Fire Insurance Scheme, a policy introduced to help relieve flat owners of the financial burden of repair work in the unfortunate event of a fire.
However, as stated on the HDB website, such a fire insurance policy only covers the cost of reinstating damaged internal structures, fixtures, as well as areas built and provided by HDB.
While there is a good intent to mandate for fire insurance policy among those taking an HDB loan, the danger here is that it could give some home owners a false sense of security. This is because the value of our home today far exceeds just the original fixtures and work that HDB has built for us.
Our home also consists of additional renovation work, such as built-in cabinetry and flooring, as well as household appliances and furniture. We would also have spent tens of thousands furnishing our home. Lastly, but most importantly, our home is also where we keep all our personal belongings and valuables. All of these are things that are not covered by the basic HDB fire insurance policy.
While Home Contents Insurance Isn’t Compulsory, It’s Vital
Regardless of whether we live in an HDB, private condominium or landed property, the insurance policy that we need to cover our homes adequately would be home contents insurance. This is an insurance policy that provides coverage for the content in our home (furniture, appliances, renovation works, personal belonging and valuables) against any losses and damage sustained from incidents such as fire and flood.
By getting a home contents insurance policy, we can ensure that the contents within our homes are protected in the event of any incident so that we don’t suffer a huge financial loss. It also provides extra cover like alternative accommodation expenses or loss of rent when your home becomes uninhabitable.
For many home owners, renovation and furnishing work within our homes can easily cost us $50,000 or more. In the event of an incident that destroys these things, we won’t just face emotional distress but also severe financial losses.
To be clear, similar to life insurance, home content insurance isn’t compulsory. Yet, this doesn’t diminish the fact that it’s extremely vital for every homeowner, whether we live in an HDB flat or a private property.
Leaving our homes unprotected is simply a risk not worth taking, especially since our homes are worth so much to us, and home contents insurance is relatively inexpensive to purchase.
How Much Home Content Insurance Coverage Do We Need?
One common question that homeowners may have is how much home content coverage is required.
In general, we should ensure that the sum insured should at least be equivalent to how much we have spent on our homes or the reinstatement cost if the property is completely destroyed These include the renovation work and the amount we spent on fixtures and furnishing.
Most home content insurance policies in Singapore also provide coverage for personal belongings and valuables (gadgets, jewellery, cash) that could be lost or damaged during an insured event. While the coverage should generally be sufficient for most of us, we may want to consider adding on personalised coverage for expensive valuables at home (e.g. collectible art pieces, Patek Philippe watches, and investment-grade wines) to our home contents insurance plan.
Depending on the type of coverage we purchase, home contents insurance can cost from as little as less than $100 a year. More expensive plans would be about $200 to $300 each year.
Insured Perils VS All Risks
Besides the sum insured, another decision to make when purchasing home content insurance is whether we want to buy an insurance plan that covers “insured perils” or “all risk”.
“Insured perils” cover our homes against common risks such as fire, explosion, pipe burst and theft. These insured events would be stated in our policy. “All risks”, as its name suggests, covers our home against a wider range of risks that may not be covered under insured perils – unless specifically excluded by the insurer.
Home Content Insurance Is Also Valuable For Tenants & Landlords
For those of us who are currently renting our homes, home content insurance is also important for us. This is because even though we may not be the one who bears the cost of reinstating the renovation work (unless we are found to be legally culpable for the damages), we would still suffer a financial loss if our personal belonging and valuables are damaged. We can consider getting a home contents insurance policy that is designed for tenants.
Likewise, landlords who rent their properties out to tenants should also consider getting home contents insurance to protect their investment properties. This is important as it provides coverage against any irresponsible actions from their tenants that may cause severe damages to their homes.
Cover image: Moo Kar Ming, DollarsAndSense