I don't need home insurance...or do I?

It's not surprising that some homeowners roll their eyes and dismiss home insurance as excessive; after all, why do you need more than fire insurance? The reason is that simple fire insurance may not protect you as much as you think:

There are three types of home insurance

●      Fire insurance

●      Mortgage insurance

●      Home content insurance

Fire insurance is mandatory, and all homes in Singapore have it. Fire insurance covers only the cost of rebuilding your home. Everything else in your home is not protected at all - so if all your valuables burn down with your home, that’s too bad; fire insurance won’t help you with that.

Mortgage insurance is mandatory for HDB flats (it’s called the Home Protection Scheme). Mortgage insurance pays off the remainder of your home loan, in the event of your death or permanent disability. Other than that, mortgage insurance usually covers nothing else (although you can sometimes pay more to add coverage, such as riders so it also covers personal accidents).

Home content insurance covers items that are inside your property. For example, if there’s a fire or leak, and your entire living room furniture set is ruined, you can make a claim from home content insurance. Home content insurance also provides coverage in the event of burglary, which is not something provided by the other two forms of insurance.

(Note: damage caused by renovations is claimed from your contractor’s insurance, not your home content insurance - so be sure you use only properly insured and licensed contractors!)

What’s the point of home content insurance?

Home content insurance is the policy you’re most likely to make claims from, on a day to day basis. There’s a pretty low probability that your house will catch fire and burn down, but there is a higher chance that burst pipes, spalling concrete, etc. may cause damage to items in your house.

Perhaps the most important part of home content insurance, however, is personal liability coverage.

For example, say your home springs a serious leak, while you’re away at work. You don’t notice this the whole day. When you get back home, you angry neighbour is yelling at you, because your leak has spread into their unit - and their carpet, furniture, precious artwork, etc. are all ruined.

Unless your lawyer does a good job, you might be liable for all the damages. This means you not only need to fix the damage to your own house, you need to fix your neighbour’s as well - and if they happen to have mainly $50,000 Italian leather furniture, then you’re in serious financial trouble.

This is where home content insurance becomes vital, as it can provide a payout to cover your liability to your neighbour. Some home content insurance policies, such as those sold by Great Eastern also provide personal liability coverage.

Home content insurance also provides some interesting perks. You can even make a claim for groceries in your fridge sometimes. For example, say you go on a three day staycation, during which the power to your fridge is tripped.

When you return, it’s to a horrible smell because everything in the fridge has rotted or melted. Some home content insurance actually allows you to claim for these lost groceries, alleviating a bit of your pain. Especially if you had expensive Japanese supermarket food.

Do buy the right home content insurance though

Overall, it makes sense for almost everyone to have home content insurance, as the premiums are very low compared to protection provided. It’s better to pay a few hundred dollars a month, than to end up having to pay tens of thousands to replace all your items after an accident.

Home content insurance often comes in different tiers, with varying levels of coverage. There is no inherently “correct” level of protection for everyone. If your home is full of pricey items, like high-end sports gear or a piano, then it’s better to get the highest tiers of protection. If you keep most of your valuables elsewhere, then you might opt for a lower tier.