What type of insurance should i get?

Most of us can agree that our most valuable items are our homes, a short circuit or fire can result in a fortune of costs . Lets take a look at the below scenario:

Five years ago, Mr Lee had invested most of his savings to purchase a RM650,000 home and sank another RM90,000 to furnish his home. He has also taken a 90 per cent housing loan from a XX BANK. One of the bank requirements is to buy a fire insurance to cover the amount of the loan, Mr Lee let the bank decide on the value and the insurance company.

Unfortunately, many of us are unaware if we have bought adequate cover for our home furnishings and whether the insurance covers meet our needs and requirements. Read on to find our about the types of insurance!

TYPES OF PROPERTY INSURANCE

In Malaysia, there are three types of property insurance covers available for house owners to select from:

• Fire insurance

• Houseowners’ Insurance

• Householders’ Insurance or content insurance

Fire insurance is designed to provide protection against material damage to properties such as buildings, contents such as household equipment, fixtures and fittings.

The policy covers the loss or damage caused by fire and lightning or damage caused by explosion of domestic boilers or gas used for domestic purposes. However, the policy may be extended to cover other perils such as:-

1. Riot and strike

2. Malicious damage

3. Aircraft damage and articles dropped therefrom

4. Impact damage (excluding own vehicle)

5. Bursting and/or over flowing of water tanks, apparatus and pipes

6. Earthquakes, volcanic eruption, hurricane, typhoon, cyclone, windstorm

7. Flood

8. Subsidence and Landslip

The Houseowner’s Insurance cover is for owners of residential properties.

It covers the building against loss or damage caused by all the perils covered by the fire policy except riot, strike and malicious damage and subsidence and landslip, except as a result of earthquake and volcanic eruption.

In addition, the policy also covers:

1. Theft but only if accompanied by actual forcible and violent entry

2. Loss of rent if building is damaged and rendered uninhabitable

3. The insured’s liability to the public in respect of bodily injury and damage

This policy may also be extended to cover:

1. Riot, strike and malicious damage

2. Subsidence and landslip

The Householders’ Insurance cover is almost identical to Houseowners’ Insurance, but the protection is meant for the contents and not for the building.

This policy would also be appropriate to renters as the landlord’s policy only covers the building and not the possessions of the renters.Insurers have introduced the Reinstatement Value Clause to meet the needs of consumers to conveniently replace or reinstate loss or damaged properties covered under a fire, houseowner or householder policy.

The clause provides payment of claim due to an insured peril without deduction for depreciation for age or wear and tear. In other words, the full cost of repairs or replacement will be met subject, of course, to the condition that the sum insured of the properties is adequate to cover the total cost of repairing or reinstating the building or insured properties at the time of the loss.

If the properties are underinsured, the insured will be compensated only in the proportion of the sum insured to the actual value applied to the full repair or replacement cost. In insurance terminology, the insurer is applying the principle of ‘average’ when this takes place.

How much should I insure for?

It is important to ensure your property is at the correct amount. When insuring your house, the sum insured should be the total cost to rebuild or reinstate it and including the professional fees and removal of debris. The sum insured value is not the actual property value, but rather the cost of reconstruction of your home.

If any renovations have been made to your property, you are advised to indicate the amount (cost of renovation) as well. If your property has unique or special design features and/or have extensive renovations and/or have complex structures affixed, you are advised to obtain professional advice for a more accurate assessment of your property. 

What is a reinstatement clause?

Reinstatement cost refers to the cost of reinstating the building back to its original condition. This means that the damaged property or asset can only be replaced with a new asset of the same kind, type, and specifications.

For example, if your furniture was damaged in a fire, you cannot get the reinstatement cost of a Television set. The insurance company will not pay for the cost of replacing the damaged asset with a more advanced one as the older asset did not possess the same advanced technology at the time of policy purchase.

WAYS YOU CAN BE UNDERINSURED

You have underinsured on your property insurance if:-

• The insured value of your house is less than the market value or rebuilding cost of the house, excluding the cost of land.
• The current insurance policy does not reflect increases in inflation.
• If you have not taken into account and reported any recent renovations or improvements to your home over the years (such as an additional room or remodeled kitchen, etc.) thus adding to the insured value.
• You have not taken a periodic inventory of all your possessions. When renewing your householders’ insurance, it is advisable to take an inventory of all your possessions. This list will adequately reflect how much coverage is needed to replace all the contents in your home.
• You may also be underinsured if you did not take up additional coverage for valuable items such as artwork, jewelry, antiques, or collectibles. For this instance, an ‘All Risks’ insurance policy can be effected to cover the valuables on an indemnification or more usually on an ‘agreed value’ basis against any loss or damage. The ‘All Risks’ cover has a list of specified exclusions.
• Most insurers will demand a valuation before agreeing to insure any items of high value.
• To avoid being under-insured, a yearly review of your property and possession should be done before renewing your policy to ensure adequate coverage. On the other hand, take into account any depreciation cost to your householder items as you do not want to pay more than necessary.

What type of questions will be asked about my property? 

Examples include: –

1. Has the property ever suffered any loss? 
2. Occupancy of the property
3. Details of the property to be insured 
4. Description 
5. Construction
6.  Location 

Find out more on Fire insurance today, visit here today. Be safe with Amana today!