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Insuring your home.
20 Feb 2016 (61 views)

1. How much should you place as the sum insured when you insure your home?

Your sum insured should be the cost of rebuilding your home in the event of a total loss, e.g. due to fire. It is based on the size of your house, and does not include the cost of the land. The insurance for the content of your house is to be determined separtely.

2. What happens when I under-insure my house?

In the event of a loss, the insurer will pay the amount of the loss, e.g. to repair the damaged property, but will apply the co-insurance percentage. For example, if the rebuilding cost is $500,000 but your insurance is only $300,000, the insurer will pay for 60% of the damage (i.e. you only insure 60% of the required value).

3.  If I insure my house for the full value, will the insurer build a new house for me, even when my existing house is many years old? Or, will they pay me a lower amount to take depreciation into account?

The general practice in Singpaore is for the insurer to rebuild the house. So, the owner gets the benefit of a new house to replace an old house. This type of cover is called "new for old". 

However, it depends on the actual cover provided in the insurance policy, so the owner should read the policy wordings or check with the agent. 

This practice does create a moral hazard, in that the owner can set fire to the house deliberately and get a new house to replace the old house. However, it is a crime to set a house on fire deiberately, so the risk of this happening is small. This crime is called "arson" and get the culprit sent to jail.

4. I have a mortgage on my house and the bank already covers the amount of the mortgage under their policy. Should I insure my house for the full sum assured or only the difference between the full value and the mortgage?

The best approach is for you to insure the house for its full value and to assign the policy to the bank to cover their mortgage. Any excess over the mortgage value is a benefit that is returned to you.

5. I live in a condominium. The management corporation covers the condominium under its policy. Do I still need to insure my unit?

You can insure your contents and renovation of your condo unit, but you do not need to insure the building, which is covered by the policy taken by the managment corporation.

You can ask the management corporation to give details of the policy to your bank, so that they do not insist on taking up additional insurnce to cover the mortgage and charge the premium to you.

Tan Kin Lian 

 

 



Insuring your home.
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1. How much should you place as the sum insured when you insure your home?

Your sum insured should be the cost of rebuilding your home in the event of a total loss, e.g. due to fire. It is based on the size of your house, and does not include the cost of the land. The insurance for the content of your house is to be determined separtely.

2. What happens when I under-insure my house?

In the event of a loss, the insurer will pay the amount of the loss, e.g. to repair the damaged property, but will apply the co-insurance percentage. For example, if the rebuilding cost is $500,000 but your insurance is only $300,000, the insurer will pay for 60% of the damage (i.e. you only insure 60% of the required value).

3.  If I insure my house for the full value, will the insurer build a new house for me, even when my existing house is many years old? Or, will they pay me a lower amount to take depreciation into account?

The general practice in Singpaore is for the insurer to rebuild the house. So, the owner gets the benefit of a new house to replace an old house. This type of cover is called "new for old". 

However, it depends on the actual cover provided in the insurance policy, so the owner should read the policy wordings or check with the agent. 

This practice does create a moral hazard, in that the owner can set fire to the house deliberately and get a new house to replace the old house. However, it is a crime to set a house on fire deiberately, so the risk of this happening is small. This crime is called "arson" and get the culprit sent to jail.

4. I have a mortgage on my house and the bank already covers the amount of the mortgage under their policy. Should I insure my house for the full sum assured or only the difference between the full value and the mortgage?

The best approach is for you to insure the house for its full value and to assign the policy to the bank to cover their mortgage. Any excess over the mortgage value is a benefit that is returned to you.

5. I live in a condominium. The management corporation covers the condominium under its policy. Do I still need to insure my unit?

You can insure your contents and renovation of your condo unit, but you do not need to insure the building, which is covered by the policy taken by the managment corporation.

You can ask the management corporation to give details of the policy to your bank, so that they do not insist on taking up additional insurnce to cover the mortgage and charge the premium to you.

Tan Kin Lian