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Home insurance 101: What exactly are you paying for?

Home insurance 101: What exactly are you paying for?

The whole idea of purchasing insurance is to protect yourself, loved ones or certain assets for unintended losses due to accidents.

One such asset would definitely be your home. That's because in Singapore, a home is perhaps one of the most expensive assets that most of us will own in our lifetime. So, instead of letting your most expensive asset be exposed to risks, why not cover it with the right home insurance?

However, we realise that most people aren't keen on getting home insurance simply because they aren't sure what they are paying for. Therefore, we wanted to start this home insurance 101 series to help readers like yourself, better understand the 'what' and the 'why' of home insurance. 

In the first part of this series, we will start with the basics and touch on the 5 coverages that you can expect when you purchase a home insurance plan.

HOME INSURANCE 101: 5 KEY COVERAGES

1. HOME CONTENT COVERAGE - PROTECTS YOUR PERSONAL ASSETS 

Home insurance isn't the same as the HDB fire insurance, which is mandatory when you take up a housing loan (with a bank or HDB) to buy a HDB. That's because, HDB fire insurance is meant to protect against damages to the internal structure of your HDB in the event of a fire.

In other words, HDB fire insurance only covers whatever you see in your home when you first took it over from HDB, i.e. when you have not done any renovation or furnishing to it.

But what about the contents in your home such as your air conditioning system, beautiful built-in walk-in wardrobe or the expensive acoustic sound system you recently bought? Or the cash stashed in a milo tin underneath your bed?

Unfortunately, these aren't covered by the HDB fire insurance but a comprehensive home insurance plan will protect these assets in the event of a fire.

2. ALTERNATIVE ACCOMMODATION COVERAGE - MAKES SURE THAT YOU AREN'T HOMELESS 

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In the event of a disaster (think fire, flooding or hurricane), it is unlikely that your home will be in a liveable condition after. You will need to undertake a renovation job to renovate your home again so that it is back to a liveable state, this will definitely take time.

If the extent of damage is minimal, it may take just a few weeks. However, if a fire has consumed the whole house, it would take a few months for the renovation work to be completed.

Where will you or your family stay in the meantime? A hotel is definitely a viable option, but it could prove to be an expensive one in the long term. With a home insurance plan, you will be covered for the expenses of a temporary accommodation while your home is being renovated.

3. PERSONAL LEGAL LIABILITY - LETS YOU TRANSFER YOUR OBLIGATIONS TO YOUR INSURER 

From a legal perspective, you and your household could be held accountable for any accidental death, injury or accidental property damage that takes place in your home. A home insurance will protect you and your household against all personal legal liabilities.

Imagine that you invited a group of friends over for a housewarming party. Someone accidentally spilled a drink and caused another friend to slip, fall and enter into a coma. Your friend's fiance ends up suing you and holding you accountable for the injury which took place in your home.

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This might sound like the script of a Korean drama, but it is not implausible. With the right home insurance, you won't have to worry unnecessarily when your friends come over for a gathering.

Besides that, home insurance also covers for your family's legal obligation towards your neighbour(s). For example, if a fire breaks out in your home and spreads to your neighbour, you are legally responsible for any damages to their home.

Having a home insurance lets you build on your basic HDB fire insurance and protects you and your household against legal liabilities.

4. COVERAGE AGAINST BREAK-INS - BECAUSE ANYTHING IS POSSIBLE 

Besides covering your home in the event of a natural disaster (i.e. fire, flooding or hurricane), home insurance also provides coverage against break-ins. In other words, if your home is broken into and your personal items are stolen, you can claim against your home insurance policy.

While there isn't a need for you to have a checklist of things in your home before purchasing a home insurance, do take note that there is a limit to how much you can claim per item. This is especially for those of you who might keep valuable items in your home (e.g. jewellery, gold or an art collection).

One thing to note is that your home must not be unoccupied for more than 14 days at the time of the incident. This is a common clause that most home insurers include in their policy's fine print.

5. EMERGENCY HOME ASSISTANCE - FOR HELP ANYTIME YOU NEED IT 

Have you ever encountered a situation where you are locked outside your home in the middle of the night? Or perhaps your water pipe decides to burst and you need immediate assistance from a plumber? These household inconveniences can strike at any time of the day and disrupt your life.

For those with home insurance, you will have 24/7 access to emergency home assistance services to help you with any household inconveniences. You can call your home insurer at any time and get assistance for plumbing, electrical, pest control or locksmith matters.

This article was first published on SingSaver.com.sg

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