Should I get home contents insurance?

If you’ve only got a minute:

• Home contents insurance and fire insurance are not the same thing. Home contents insurance protects the interiors of your home, while fire insurance covers damages to the structures of your home.
• The coverage amount for home contents and renovations varies from policy to policy and can affect the price of the premiums paid.
• While home contents insurance is optional, it could be worthwhile, given the financial costs of home repairs.

Your home is more than just a physical asset. It’s where you and your loved ones live, where memories are made, and where life happens.

For many of us, our home will also house most of our belongings - from the most mundane daily essentials to expensive home appliances and perhaps, precious family heirlooms. This means if something disastrous happen to your home, you could stand to lose everything. That’s where home contents insurance can come in to mitigate some of those losses.

What is home contents insurance?

You might vaguely remember signing up for fire insurance when you purchased your property. However, fire insurance and home contents insurance are quite distinct from each other as they protect different aspects of the home.

Fire insurance provides coverage for damages caused by events such as fire, to the structures of your house – walls, structural pillars, permanent fixtures. On the other hand, home contents insurance provides a payout for the contents of your home that is not part of the structure – renovations, appliances, personal belongings and may even cover pet protection.

The coverage amount for home contents and renovations varies from policy to policy and can affect the price of the premiums paid. Thus, it is important to take the time to compare plans before deciding which one best suit your needs.

Is it worth buying home contents insurance?

Unlike fire insurance which is compulsory for flat owners with a HDB home loan or bank loan, home contents insurance is optional. But taking into consideration the financial costs of repairing damages to home contents, it might be worthwhile to consider it.

Some common scenarios where home contents insurance can come in handy include:

• Fire, lightning or explosion
• Flood
• Bursting, leaking, discharging or overflowing of water tanks or pipes
• Malicious act of any person other than you, your household or any other person living in your home
• Theft or burglary by violent and forcible entry into your home by any person other than a member of your household or any other person living in your home

Another important coverage element to consider is the financial support for a temporary relocation if your home becomes completely uninhabitable. Imagine a situation where a fire took place and you only have fire insurance: While the structures of your home will be covered by fire insurance, you will have no place to house your family, adding to the financial and emotional losses you’ve incurred in the disaster. If protecting your belongings is a priority, home contents insurance would make a valuable purchase.

Let’s take for instance, a home contents insurance plan with an annual premium of S$119.88. Assuming that you paid the insurance for 10 years, you would have incurred a total cost of S$1,198.80.

Let’s say in the 10th year, a small explosion from your microwave caused damage to your kitchen counter, including several appliances, such as the stove and a coffee machine. Luckily, no one was near the area when it happened. The total costs to replace the appliances, as well as repairs for the kitchen counter came up to S$5,000, all of which could be claimed under the home contents insurance.

In this case, the insurance premium is a small cost compared to the amount of potential damage your home suffered.

Who should buy home contents insurance?

You might find home contents insurance relevant if:

• You’ve spent extensively on home renovations
• You’re an antique collector
• You own expensive furniture
• You keep valuables at home, such as jewellery or family heirlooms

Common exclusions

Those who intend to buy home content insurance should also take note of some common exclusions.

Most of the time, coverage will not include properties which are not occupied for more than 60 days. Additionally, some insurers will not pay for damage incurred to certain items, such as musical instruments, or only cover some valuables (such as jewellery) up to a certain percentage of the sum insured.

For home contents protection, you will also need to keep the receipts for all the assets you want to protect. In the event that you’re not able to produce a receipt while submitting a claim, certain insurer’s claims assessors will still review the case accordingly. It is also advisable to examine the policy wording to find out coverage limits per benefit.

Do review your coverage as and when necessary, as per any other types of insurance. The sum insured amount for contents/ renovations should be selected as if they are new. For instance, if you’ve just spent S$100,000 renovating your home or installed an expensive home theatre system, you might want to consider to a higher tier of coverage (at least S$100,000) to protect your new assets.

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.