Fire insurance claims surged 17.4 per cent last year, after a 26 per cent dip in 2014, so it pays to protect the biggest of our big-ticket items - our homes and their contents
Most of us are single-minded when it comes to insuring things like our children's education and family healthcare, yet many neglect protecting the biggest of our big-ticket items - our homes and their contents.
And while a man's home is his castle, it does not follow that the castle itself is a fortress when it comes to a fearful risk like fire.
There was a double-digit percentage surge in fire insurance claims last year, says Mr Derek Teo, chief executive of the General Insurance Association of Singapore (GIA).
Fire insurance claims surged to $42.6 million last year, from $36.3 million in 2014 - a rise of 17.4 per cent. This was a stark contrast to the 26 per cent dip in fire insurance claims in 2014, said the GIA.
Last year, about 63 per cent of fire calls were from residential premises, according to the Singapore Civil Defence Force.
"This goes to show how vulnerable we are to fire accidents. Not many households are prepared for the possibilities of a fire or have a fire extinguisher at home," says Mr John Brice, senior vice-president, underwriting, at MSIG Insurance (Singapore).
"A small fire can engulf the entire home if the home owner does not know how to suppress it before the fire department arrives," he adds.
So erecting an "insurance firewall" is essential but there are some myths to deal with first.
FIRE INSURANCE COVERS ONLY FIRE
It is a common misconception that fire insurance covers only loss and damage to your property - the structure, permanent fixtures and fittings - due to fire.
Other perils are covered as well, at no additional charge, including explosions, lightning, bursting or overflow of water tanks and apparatus, road vehicle and aircraft impact, malicious intent, riots and strikes, earthquakes, windstorms and floods.
But note that some insurers may charge additional premiums to cover "full flood", which means overflowing of water from drains, canals or the sea.
Besides covering the structural building and permanent fittings, Ms Koh Yen Yen, Sompo Insurance Singapore's chief distribution officer, advises you to consider an additional policy that covers contents and renovation work.
"A more comprehensive home insurance will offer inconveniences coverage, emergency home assistance services, worldwide family liability and even cost of tracing and accessing of water seepage," she says.
Mr Ganeswaran Subramaniam, head of personal insurance (South-east Asia) at AIG Asia Pacific Insurance, says the highest claim it has paid out under its Enhanced Public Housing Contents Insurance was about $90,000 for a fire that occurred because of an electrical fault.
"The contents of the policyholder's living room (which were not covered by fire insurance but were insured under a home contents plan) - a sofa set, tables, cabinets, a television set, refrigerator, laptops, printers and other appliances - were damaged," he notes. "The damage also extended to the walls, windows, ceiling, and electrical wiring. Fires can also trigger smoke and water damage and, in this particular case, the contents in the policyholder's bedrooms, kitchen and toilets sustained heat, smoke and water damage."
Imagine having to cough up $90,000 if you did not have home contents insurance.
FIRE WILL NOT ENGULF MY ENTIRE HOUSE
A fire can happen anywhere and at any time and can spread quickly, engulfing a property within minutes.
Insurance experts point to a fire in October at Block 38, Bedok South Road, where both the flat and the homeowner's belongings were completely destroyed. The blaze was caused by sparks from the homeowner's computer and cables.
Mr Subramaniam of AIG urges home owners to have insurance to cover structural damage, fixtures and fittings and personal possessions.
Even if your house is fully paid up, it is worth continuing your insurance to cover what you have spent thousands of dollars to build up, says MSIG's Mr Brice.
Insight's Mr Neo says that even if the fire was confined to one room in the house, the spread of heat, soot and water would often affect the entire home.
Sompo's Ms Koh advises home owners to consider an additional policy that covers contents and renovation work.
General Insurance Association's Mr Teo said premiums for fire insurance are generally not costly, when compared to the value of property insured.
Ms Koh warns that homeowners can also suffer damage caused by fire in the near vicinity. For instance, a major fire at a coffee shop and wet market at Block 493, Jurong West Street 41, resulted in homeowners incurring expenses for the damage caused by soot from the flames.
"Dirty and oily, soot will stain walls, furniture and upholstery. The smoke odour can stay on curtains, carpets and upholstered furniture for a long time. Hence a proper cleaning and deodorising of the house and furniture will be necessary," says Ms Koh.
Ms Koh Yen Yen, Sompo Insurance Singapore's chief distribution officer, warns that homeowners can also suffer damage caused by fire in the near vicinity.
"Such expenses incurred for damage arising from a fire which did not originate from the insured home will be covered by a good home insurance that covers accidental damage."
Mr Nehemiah Neo, managing director of insurance loss adjuster Insight group, says that even if the fire itself was ultimately confined only to one room in the house, the spread of heat, soot and water would often affect the entire home.
"We handled a claim involving an apartment residence where the fire was confined only within one of the bedrooms. The cost of restoring the rest of the house, which was affected by soot and extinguishment water, was much more significant than the repair cost of the direct fire damage," he notes.
"The claim was ultimately settled in the region of $70,000."
NO NEED TO BUY FIRE COVER IF HOUSE IS FULLY PAID UP
It is not mandatory under the law to buy fire insurance, says the GIA, but some banks demand it when you take a home loan.
Without an outstanding loan, fire insurance is optional for property owners.
The HDB does not require home owners to buy fire insurance if the HDB loan is fully paid. Still, it is prudent to have adequate fire cover and consider protecting your home contents too.
"While there may be no legal obligation or requirement, it is still important for home owners to have fire and home-contents insurance to cover for structural damage, fixtures and fittings and personal possessions, so that they are not out of pocket in the event of a fire," says Mr Subramaniam.
Mr Neo notes that for private condominium estates managed by a management corporation (MCST), the MCST would usually take up a fire insurance policy to cover the building and all original developer's fixtures, excluding paintwork. So the home owner should at least get a fire insurance policy to cover his own renovations and contents.
For a landed house (non-strata titled), there would be no common body to buy a fire insurance policy on the owner's behalf, so the owner should get cover, not just for his own renovations and contents but for the building as well.
Insurance provides you with peace of mind if something goes wrong and is beyond your control. You may have done your best to prevent a fire in your home but what if the fire originates from your neighbour's, warns Mr Brice.
He recalls a recent claim involving a fire which broke out in a neighbouring unit and spread to a semi-detached home covered by MSIG Insurance. The fire caused extensive damage to the building's roof and one of the adjoining bedrooms.
The entire house was also affected by water damage and was covered in soot. The MSIG customer had bought a home insurance policy that covered both the building structure and home contents. After assessing the damage, MSIG paid out close to $500,000 for the claim.
Mr Brice adds that he has also come across cases where a tree belonging to an MSIG customer fell onto a neighbouring unit. MSIG would pay out the claim as personal liability is covered under its home insurance policy.
This means that even if your house is fully paid up, it is worth continuing your insurance to cover what you have spent thousands of dollars to build up, he says.
THE REINSTATEMENT COST WILL BE AFFORDABLE
A fire in a house, even when confined to one room, can often result in a five-figure loss due to the spread of heat, soot and water.
If a fire causes structural damage, the loss can easily be in the region of six or even seven digits, so the reinstatement cost cannot be deemed to be affordable, says Mr Neo.
Many owners might find it difficult financially just to place a down payment with their contractors to carry out the reinstatement works.
Mr Neo added that when the fire damage is severe and the house is uninhabitable, the owner will have to incur additional expenses for alternative accommodation, which can be significant depending on the duration of the reinstatement works.
If a fire causes structural damage, the loss can easily be in the region of six or even seven digits, so the reinstatement cost cannot be deemed to be affordable, says Mr Nehemiah Neo, managing director of insurance loss adjuster Insight group.
He recalls handling claims where the owners eventually moved back into the house only several months or even more than a year later, after the fire.
If the house is insured, the owners can often get an interim payment from insurers to commence the reinstatement works, thus easing their financial difficulties.
FIRE INSURANCE IS COSTLY
Premiums for fire insurance are generally not costly in comparison to the value of property insured, says Mr Teo.
For instance, the annual premiums on private dwelling buildings on a sum insured of $1 million (reinstatement value) could range from $750 to $1,000 for landed properties. Premiums tend to be lower for apartments.
As an indication, the annual premium for a non-HDB apartment can range from $250 to $350 on a reinstatement sum insured of $500,000, he adds.
Ms Koh and Mr Brice note that if you have an HDB loan, you must buy the HDB Fire Insurance from its appointed insurer.
The five-year premiums (including GST) are very affordable at between $1.50 for $19,300 sum insured for one-room flats, and $7.50 for $98,200 sum insured for executive/multi-generation flats.
However, note that the coverage is basic. It is meant for reinstating damaged internal structures and fixtures, as well as areas built and provided by the HDB up to the sum insured but excludes home contents and additional renovations to the unit.
Ms Koh adds that for the same floor area, the cost of reinstatement for private properties would cost more due to the quality of materials used and more extensive fixtures installed.
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