The fact that many expats are renting in Singapore, along with the low crime rate here, means that building and home contents insurance is often way down the list of importance for us. I have been very casual with getting my home contents insured in Singapore and when I did have a loss (some jewellery disappeared) my insurance policy didn’t cover it. Here, PETER WILLIAMSON, of Avrio Wealth looks at home insurance cover in more detail.
Home insurance can mean different things to different people
Some people want to ensure that their physical building is protected against the financial risks of loss or damage. Protecting personal possessions – the things that make up what’s described as home contents insurance – is a small and secondary consideration.
For others, the major financial risk of the physical building that they live in is either covered by another insurance policy or not their concern because it’s not theirs.
Either way, owners of valuable assets may be tempted to save on their policy premiums; the problem is, when they do make a claim, they find they’re not sufficiently covered. Ordinary home insurance policies can offer low premiums because they come with ‘small print’ limiting the amounts they pay out. So, if you own a higher value home and valuable assets, it may be too late when you realise you’re not adequately insured.
The golden rule of general insurance is to remember that you will get what you pay for! The industry is highly competitive and adapted for each country, and premiums are calculated on the historical loss data of that marketplace. If the premium is low, you can be sure that the coverage is also low.
What type of home insurance do you need?
Home contents insurance or building insurance? It’s very important to understand exactly what is insured and for how much. There are typically three types of policies in the marketplace:
- Full replacement
- Agreed value
- Depreciated cost (non-recoverable depreciation)
The best place to start is to consider what financial losses you cannot afford. Make a list starting with the highest value items; obviously a physical building is up there but when most people go through this exercise, they tend to be surprised at what the replacement value of all their possessions could add up to. The good thing is that losing everything through an event such as fire has a low probability; it therefore costs less to insure than, say, the risk of loss through theft or an accident.
Important: Read the fine print!
There is a great risk that the full description as to how much you will really receive is hidden in the policy fine print. Always read the policy wording! If there are words that you don’t understand, make sure you ask the insurer for the meaning.
What additional insurance covers are important?
Are you protected against the financial risk of your actions or inactions causing financial harm to other persons? Personal liability cover might be an infrequent claim but the financial loss from settling that liability can be very damaging. Examples include someone slipping in your apartment, or a child falling off a wall.
In the case of fire or flood damage, can you afford the additional living expenses while you can’t live in your home?
Do the policies you’re looking at cover Newly Acquired Items? Or do you need to get your policy endorsed for expensive new items? (It’s not too hard to knock a coffee onto a new laptop, for example!)
Are there limits on claims on Valuable Items? Once again, often these limits are buried deep in the fine print.
Are your personal possessions covered outside of your home? What if you’re travelling? Most travel insurances have very minimal coverage for personal possessions; phones and jewellery seem to be the key ones.
How does the policy define Accidental Damage and Negligence? This is also often in the fine print!
Keep good records for home insurance
This is a great habit to get into because insurers will require proof if you claim. And remember: How you complete the proposal form often has a significant influence on both the cover that you end up with and the premium you pay.
While it’s easy to think Home and Contents Insurance is a ‘tick the box’ exercise, thorough financial planners appreciate the need to assist customers to understand and acquire the cover that will ‘do what it says on the tin’ and meet their need when it matters. This is especially the case when there are valuable possessions that are part of what makes their clients who they are – be it their homes, collectibles, heirlooms or passions.
Set up an online consultation to see if Avrio may work out a long-term solution for you.
This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/ and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm’s ADV Part 2 Brochure, please contact us at firstname.lastname@example.org
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