Do You Really Need Home Insurance?

The typical responses would be:

• “Hardly a chance as it is unlikely I will be so unlucky.”
• “In any case, my home is already insured against a fire breakout.”

The above may sound familiar to most of us who do not believe in or have not purchased home contents insurance. But let’s take a look at reality:

	Fact 1 Most homes only have basic fire insurance which covers the reinstatement of the internal and external structures of your home. It does not compensate you for damaged renovation works, nor furniture or personal belongings that are stolen or destroyed.
	Fact 2 Fires or flash floods are not isolated incidents; very often, they can lead to bigger problems such as burst water pipes or short-circuiting of electrical appliances within a household. The costs of restoring these localized damages can snowball to substantial amounts.
	Fact 3 In apartments, fire and water damage incidents can be caused by neighbouring units. These incidents, through no fault of your own, may damage your home and belongings.

When such incidents happen, they can have a major impact on your liquidity. Just think of the amount of work and expense required to fix your property and replace the furnishings and belongings. This potential problem does not apply to only homeowners and landlords, it affects tenants too.

Choosing the right coverage for your home

With the plethora of policies in the market, how do you select the right one? What should be the right mix, in terms of coverage?

Besides a comprehensive cover for your physical home, think of how you can further stretch your dollar to protect you and your family.

In the event of a mishap within the insured premises, some home insurance policies provide personal liability coverage, as well as 24-hour Emergency Home Assistance Services – which certainly come in handy in times of need. Should your home become uninhabitable due to the mishap, some policies also cover the cost of putting up at a temporary accommodation until your property is fully restored.

If you are leasing out a plain-vanilla property without renovation and furnishing, it makes sense to opt for basic coverage for the internal and external structures of the home unit. But if your tenanted property is fully renovated and furnished, it is prudent to expand the coverage to include the loss of or accidental damages to contents and renovation.

Additionally, as a landlord, you take on different risks, including potential rental loss in the event of property damage and tenants absconding from their liabilities (e.g. rental payment). There are also legal liabilities to your tenants and neighbours, should the mishap at your property affect their well-being. These risks should be well-mitigated with the right protection.

Many tenants think that their landlord’s insurance will cover their losses if there’s a break-in, fire, flood, or other catastrophic events that may wipe out their belongings. This is not the case as the coverage in the landlord’s insurance will typically only protect their own interests.

In other words, your investments to create a cosy home - the customised furniture, costly home electrical appliances, and precious knick-knacks that were bought during your overseas vacations - are your sole responsibility. They ought to be well protected.

Just like landlords, all tenants have their share of liabilities. You should be prepared to compensate for loss of or damage to your landlord’s buildings, renovation and contents that arise during the tenancy period, or if there is third party injury arising from an accident on your part.

With the myriad of options available, it can be daunting to pick the right cover for your home. The key is to keep track of the costs that have been pumped into building your dream nest and the value of your home contents to determine the appropriate level of protection needed.