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A person holding an umbrella; image used for HSBC Singapore How to protect your home and everything in it article.

How to protect your home and everything in it

Do you need fire insurance, home insurance, or both? One protects your house; the other protects its contents. Make sure you're covered before it's too late.

The concept of insurance is hardly new. For thousands of years, people have looked for ways to protect themselves financially against unforeseen events. The ancient Babylonians insured their seafaring expeditions, as did the Greeks and Romans.

In 1666, the Great Fire of London ravaged the city for 4 days, wiping out a quarter of the housing stock. In today's market, it's estimated that a fire of this magnitude would cost around the equivalent of SGD844 billion1. But out of this disaster, the birth of modern insurance companies was kindled.

Nowadays, insurance is not limited to maritime contracts and fire coverage. If something is of value, chances are you can insure it.

There are many different types of insurance policies to choose from in Singapore. Singaporeans spend a monthly average of SGD370 on insurance plans2, with the majority spent on health. Home and fire insurance are the most common property insurance policies sold.

What type of insurance do you need: home or fire?

It doesn't matter if you're a homeowner, landlord or tenant. Insurance is a necessity that you hope you'll never need, and the best time to shop for it is before you move in or close on the purchase.

Fire insurance is compulsory for HDB owners with a HDB mortgage or loan. It provides coverage for structural damage sustained during a fire or other incidents listed in the policy. Unless stated, fire insurance will not cover you for personal injury.

Home content insurance, which is usually purchased to supplement fire insurance, covers the contents of your home, personal belongings, fixtures and renovations. The cost of the policy depends on the item being insured and the risk involved. The more valuable the insured item, the higher the premiums and deductibles will be.

There's been a fire. Who will be covered?

Let's imagine there has been a serious fire, with extensive smoke and water damage, as well as loss of personal property and home contents.

Now let's look at 4 different homeowners and see what kind of coverage their chosen insurance plans would offer them. Would it be enough to fully compensate them for their losses?

1. Mortgage insurance only

Mr Tan and his family recently moved into their spanking new house after a few months of renovation work. Mrs Tan is a homemaker and as the sole breadwinner, Mr Tan took up a mortgage insurance policy, to ensure that his family wouldn't go into debt and lose their home if anything unfortunate happened to him.

But an electrical trip led to a huge fire at their home just 2 months after they moved in.

If the unthinkable had happened and Mr Tan had passed away as a result of the fire, the mortgage policy would be paid out to his family, and even in his absence, they would be able to repay the outstanding mortgage loan. His wife wouldn't have had to frantically look for a job just to be able to make the mortgage payments.

The good news: Mr Tan walked away from the fire, uninjured. The bad news? He had no fire insurance or home contents policy in place, which meant he'd have no roof over his head and yet has to continue repaying his mortgage loan.

If he had purchased either fire or home contents insurance, at least a portion of the repairs would have been covered and that could go towards rebuilding his home for his family to stay in.

Verdict: 0% covered

2. Fire insurance only

Miss Yusof bought fire insurance – also known as building, fixtures and fittings insurance – when she took out her home loan. A fire insurance policy will cover the estimated cost of rebuilding a home if it's destroyed by a fire or other disaster listed in the policy.

Miss Yusof was unaware, however, that her insurance policy only covered her for rebuilding the external structural and replacing the original fittings, but nothing else.

The cost of replacing her home contents, plus the cleaning needed for extensive smoke and water damage, ended up being more than the fire damage itself.

Miss Yusof's beautifully renovated kitchen and fitted wardrobes were not listed on the policy, and therefore not covered. More bad news: she had to borrow the spare room at her sister's place – her insurance doesn't cover alternate accommodation either.

The silver lining for Miss Yusof is that the damaged portion of her house will be fixed. But she'll have to pay to replace all her personal possessions.

Verdict: Partially covered

3. Home contents insurance only

In Singapore, not all home loans require you to buy fire insurance. So Mr Pang decided he'd save some money and just purchase home contents insurance. He had a lot of expensive furniture and art, and this made sure his personal belongings were fully covered.

When the fire broke out, Mr Pang's roof and walls sustained extensive damage. His home contents insurance policy covered him for items damaged by the fire, but not the house's structure. Mr Pang realised that even though he'd be able to replace his precious belongings, he no longer had a roof over his head to house them.

Mr Pang's home contents insurance covered him for temporary furniture, changing his locks and keys, and even got him started on the second edition of his fine art collection.

Fire insurance may not be mandatory, but for Mr Pang, it certainly proved to be a necessity.

Verdict: Partially covered

4. Comprehensive home and fire insurance

When Mrs Nair bought her house, she purchased both fire and home contents insurance to protect her house and her personal belongings. Compared to the cost of her new house, Mrs Nair figured the insurance for complete peace of mind wasn't really that expensive. Smart move!

The fire insurance covered the cost of repairing the structure of the building. The home insurance covered everything else in the house, including furniture, appliances, computers and clothes. Even her helper's personal property and the spoiled food in the refrigerator were covered.

Verdict: 100% covered

Fire insurance: inclusions and exclusions

Every fire insurance policy is different, but you can expect to see most plans cover your home's exterior and fittings, typically excluding your home's interiors, such as:

  • renovation work
  • household contents
  • personal injury claims
  • third-person liability
  • money, watches and art
  • alternate accommodation

What home insurance will you need, and how much?

When buying insurance, there are a few things to consider, such as the value of your home and its contents, and the deductible you're willing to pay to keep your premiums down.

You won't need massive coverage for expensive artwork if your home décor consists of a few IKEA posters. The type of insurance you get will also depend on whether you're a landlord or tenant. If you're renting, you could already be covered (but don't assume this – best to ask).

One of the most important things to check is not what's included, but what's excluded. The last thing you want when dealing with financial or personal loss is finding out you're not adequately covered. Take your time to research insurance companies and their policies before you commit. You might even find it helpful to get your professional advice.

After your policy is in place, it's a good idea to check it yearly. You may have purchased items that won't be accounted for or have made home improvements that increase the value of your property. Or maybe you might have sold a big-ticket item that no longer needs to be included in your content inventory, so your insurance premiums would actually go down.