Not reviewing your home insurance plan can mean paying for a plan that does not match your needs. Worse, it can trigger a reduction in your benefits due to under-insurance.
Your home insurance policy is an integral part of your insurance portfolio. It covers your property and belongings, and is the best option for restoring your home in the event of a fire, burst pipes, or similarly disastrous accident or event.
As such, homeowners should make it a habit to regularly review their home policies, and update them when necessary.
Understanding your home insurance policy
Is home insurance policy the same as HDB fire insurance?
No, they are two different policies.
HDB fire insurance – mandatory for all HDB flat owners – is concerned mainly with the costs of repairing and restoring structural and exterior damage.
For example, if your house catches fire and causes the common corridor and your neighbours’ unit to be blackened with soot, your HDB fire insurance plan will go towards covering the cost of cleaning up and repainting the affected areas.
Similarly, the HDB fire insurance policy will also cover the costs of repairing internal structures and fixtures inside your unit, but only so far as to its original state.
Renovations and alterations won’t be covered, so don’t expect HDB to pick up the bill for restoring those fancy ceiling cornices commemorating your honeymoon in Greece.
Only HDB homeowners have HDB fire insurance. Private property owners will need to ensure they have their own fire insurance plan; this is easily enough done, as all home insurance plans offer this benefit by default.
What a home insurance policy covers
A home insurance policy primarily covers the following:
- Renovation works
- Building and structural works
- Personal belongings and/or valuables
- Third-party liability
Some home insurance plans may also include additional benefits, either by default or as add-ons, such as:
- Personal cash
- Replacement of locks and keys
- Spoilage of fridge contents
- Handyman services
Note also that home insurance policies come in two varieties – insured risks, and all risks. The former only covers hazards and events that are explicitly spelled out in the policy; meanwhile, the latter covers all hazards and events, whether specified in your policy or not (except those specifically excluded).
All-risks plans offer a wider range of occurrences, but cost more. So it’s important to study the policy document to see if the insured risks version is sufficient for your needs.
When to review your home insurance policy
Now that you understand what a home insurance policy does, let’s discuss when you should review your home policy.
When you first move in
When moving into your new home, don’t forget to sign up for a home insurance policy.
It can be easy to neglect doing so in the excitement of moving in and setting up your new place. But should an accident happen, you’ll have to bear the costs of repairs and replacements out of your own pocket.
After renovating your home
Another good time to review your home insurance plan is after you have renovated or remodelled your home.
Your renovations, furniture, appliances and embellishments probably add up to a pretty penny, so you’ll want to ensure your home insurance policy offers sufficient coverage. Consider increasing your renovation or home contents coverage to match, or switch to another plan that does.
Upon the expiry of your current plan
Before renewing your current home insurance plan, take a moment to review the additions and alterations you may have made to your home or personal belongings.
That new smart TV, gaming PC, Wifi-enabled lighting system, indoor-drying smart rack, water purification system, or other high-value appliances or fixtures are sure nice to have, but they may exceed the coverage limits in your current plan. This means that you will not be able to claim up to their full value.
This goes double for your valuables, as home insurance policies have strict per-item limits for items such as laptops, luxury watches, jewellery, paintings, antiques, etc.
As such, if you’re planning on keeping a Rolex collection at home, it is wise to sign up for a separate luxury items insurance plan to protect your investment.
What happens if you don’t?
Not reviewing your home insurance policy regularly increases the risk of under-insuring your property, which will exacerbate a bad situation.
You see, when your home insurance coverage does not match up to the value of your home, you will have to pay for any shortfall out of your own pocket.
If your insurer finds the gap between your policy coverage and the value of your home to be substantial, your case may be treated as one of under-insurance.
Under-insurance means that your insurer is entitled to reduce the amount of benefits you are entitled to by a corresponding percentage. See below for a quick example:
Actual value of home: S$500,000
Actual value of home: S$500,000
Insurance coverage: S$300,000
Insurance coverage: S$600,000
Under-insurance: S$200,000 (40% of S$500,000)
Total benefits paid: S$180,000 (60% of S$300,000)
Total benefits paid: up to S$500,000
In the left-hand column of the table above, we have an insurance policy of S$300,000 for a property that is worth S$500,000. The property is under-insured by S$200,000, which is 40% of its actual value.
Because of this gap, your insurer is entitled to cover only 60% of your claims. Hence, instead of receiving the full S$300,000 in benefits, you will only receive S$180,000.
You may notice that trying to restore a S$500,000 home on a budget of S$300,000 is already challenging enough. But if you’re found to be under-insured – they will know, because they will send an assessor to evaluate the damage and replacement work needed – you will have to contend with an even smaller insurance payout!
Clearly, under-insuring your property is not a good idea; in fact it can be downright financially ruinous. Therefore, you should always ensure you have sufficient home insurance coverage for your property – regularly reviewing your plan will help you do just that.
Protected up to specified limits by SDIC.
Note: This is only product information provided. You may wish to seek advice from a qualified adviser before buying the product. If you choose not to seek advice from a qualified adviser, you should consider whether the product is suitable for you. Buying an insurance product that are not suitable for you may impact your ability to finance your future healthcare needs.
If you decide that the policy is not suitable after purchasing the policy, you may terminate the policy in accordance with the free-look provision, if any, and the insurer may recover from you any expense incurred by the insurer in underwriting the policy.