July 15, 2007

It pays to protect your home

Don't wait till disaster strikes to buy insurance to safeguard your property and home contents

By Lorna Tan, Finance Correspondent

AS SAFE as houses, the saying goes.

Well, not really. Many things could go wrong after you buy your dream home.

The place could go up in smoke or burglars could strike. Or worse, the main breadwinner could die, leaving a mortgage that has not been fully paid.

You do not have to be mired in gloom to consider these possibilities.

The smart thing to do is to take sensible safeguards to ensure that if unexpected events do strike, you will be covered financially.

After all, the purchase of a property involves a big sum of money and is a long-term financial commitment.

The best way to protect yourself is to transfer the risks to insurance firms, which have a variety of policies that provide coverage at affordable premiums.

Property insurance

Banks require home owners to take out property or fire insurance when they grant housing loans.

They want to ensure that the value of their collateral - the insured property - is not jeopardised in the event of fire or other perils that can be insured against.

The proceeds are meant to pay for the outstanding loan balance in the event of a total loss and the owner ceases to service the loan.

For condominiums, the management corporation would have arranged a fire insurance policy against fire and various perils, for the common areas and structural building.

However, this coverage is normally for the building only and typically does not cover your renovation, contents and so on. For example, the risk of loss or damage due to burglary might not be covered.

For HDB home owners who take a mortgage loan with the Housing Board, the latter offers a basic fire insurance scheme that does not cover contents and renovation costs.

Society of Financial Service Professionals president Leong Sze Hian says the low premium of about $60 for five years for the HDB basic fire insurance scheme covers only the foundations, which include the walls and bare floors, as well as standard fixtures and fittings.

Singapore Insurance Institute president Stanley Jeremiah says that many home owners believe they are adequately insured as long as they buy a fire policy.

This is an illusion es