Extensive renovations and expensive installations aside, one commonly overlooked consideration is to make sure your home insurance is up to speed with the value of your new property.
If these COVID-19 times are good for anything, it would be for people in the market of buying a new property for rent or upgrading from a HDB to a private home. As Singapore heads towards a recession, the first quarter of 2020 saw a fall of 1.2% in the private residential property index according to the Urban Redevelopment Authority. This is in addition to already declining prices from previous quarters in 2019.
While it remains to be seen if private property prices will lower drastically in the next two quarters, analysts are predicting an 8% drop for the full year. It doesn’t hurt to start shopping and putting out feelers if you’re thinking of buying anyway. At the same time, you could also find out if your home insurance needs will have to change.
Is there a difference between Home Insurance for HDB and Private Property?
Strictly speaking, there isn’t; so if you’re already getting a good loyalty rate from your insurer, you can consider sticking to the same company. However, you would probably need to increase the coverage in your new plan and commensurate to the value of your new home.
When insurers talk about home insurance, they are not referring to fire insurance, which is mandatory for all new and existing homeowners via HDB’s scheme under an appointed insurer. Home insurance generally refers to “home contents” insurance, which is your household contents – furniture, appliances, aircon and wardrobe - as well as renovation work.
Upgrade your insurance if you’ve tricked out your home in expensive stuff
Moving to a private property is a milestone and many people who upgrade from HDB to a condominium or landed home would be spending a lot more on renovations. Thus, it would make sense to upgrade your home contents insurance to the right tier, especially if you’ve outfitted your new abode with a state-of-the-art sound system or a wine fridge with rare vintage in the kitchen.
What’s good: MSIG’s Enhanced HomePlus has one of the highest maximum coverage for home contents we’ve seen on the market, (up to $125,000).
Staying in a landed home means more risks to insure
Getting the right home insurance with riders that can cover damages to private property is necessary, even though it is not compulsory in Singapore to have home contents insurance. Especially if you’ve made the leap from HDB or Condo to a landed property, then you’d have even more risk to bear.
Unlike HDB or condominium homes where all homeowners collectively pay a maintenance or conservancy fee, landed homes are standalone buildings owned by one party only. Thus the homeowners are directly responsible for the maintenance and protection of the entire building, not just the interior contents.
Living in a landed property comes with other risks that don’t really affect HDB and condo owners. For example, falling tree branches, flooding or burglary are much more likely to occur for landed homes.
What’s good: AXA’s SmartHome Essentials is a good choice for landed property because it covers all of the risks mentioned above and more.
What about home mortgage insurance?
Home mortgage insurance is a compulsory insurance plan for all HDB homeowners using their Central Provident Fund (CPF) savings to pay the monthly installments of their home loan. Known as the Home Protection Scheme, it protects the homeowners and their families from losing their flat in the event of death, terminal illness or total permanent disability.
While private properties are not subject to the same scheme, it is highly encouraged for condo and landed homeowners to sign up for similar protection with a home mortgage plan. This is because a mortgage is usually the largest portion of a household’s liability – up to 75% to be exact.
With a higher value home loan as well as maintenance charges, liability risks and not to mention, additional investments placed on their new home, private property homeowners’ finances are undoubtedly stretched out.
What’s good: Get a plan that offers a full refund of premiums paid at the end of your policy term if no claims had been made – much like OCBC’s Mortgage Reducing Term Cover plan.
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