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Do you really need fire insurance for your house?

HDB made it mandatory to purchase it if you buy a HDB unit with a loan, most banks also made it mandatory if you take up their housing loan to purchase a property in Singapore. The question is why?

It is because you took a loan from HDB/Banks, and they are concerned that if the property is destroyed by fire for example, the owners refuses to repair it and subsequently defaulting on the loan. After repossession of the property by HDB/Banks, they have to spend money for repairs before they can sell it off to recoup their loan monies and they don’t want this kind of liabilities on their hands, so they make you buy an insurance for it.

So how does this fire insurance works?

When a fire happens and the property is burned inside out, this insurance is to cover the cost of reinstating the property back to the original condition. Original Condition would means whatever that came with the HDB unit (e.g stuff from optional component scheme), but does not cover your renovation works. If your condo is a brand new unit from developer, whatever the developer gave you e.g aircon units, fixtures etc will be included in the coverage terms.

Lets take Etiqa which is HDB insurer, estimates that for a 5 room HDB unit, at worst case scenario, the maximum reinstatement cost is $75,600, hence you get the Building Sum Insured at that amount. What you can do is to take up additional insurance to cover your renovation works or expensive stuff such as Paintings, expensive jewelries etc. Some insurers have “upgrade options”, so check with your insurers. A quick look at MSIG standard enhanced fire insurance, for a coverage of $50,000 on personal effects (e.g tv, sofa, tables etc) and a $75,000 on renovation works, the annual premium is only $118.77 (works out to $9.90 a month), very affordable!

Building Sum Insured is always determined by the insurer, its pretty standard for HDB units or Condos (the higher the Building Sum Insured, the higher the premium). For landed properties, insurers have to visit the property before they can give you a quote. The cost of rebuilding a single storey house vs a 3 storey house is way way different.

Main damage coverage categories : Fire, Aircraft, Bursting of water pipes or water tanks, Smoke.

Aircraft damage, this is an interesting category. You might be thinking what is the chance of an aeroplane flying into your HDB? I supposed the chances are almost 0%, but what about those flying drones/toys which are sold widely across the island? Lets imagine it like a scene in the movie Final Destination, a flying drone flew from nowhere, hit the window grill of an open window, the drone got stuck and short circuited, and the battery caught fire, the fire spread to the curtains hanging by the window, and what happens next, you can imagine it. If you don’t have a fire insurance in place, who are you going to look for to claim the damages? I’m sure you know the answer.

Here is a direct quote from Etiqa Fire Insurance:

“The insurance under this Policy shall, subject to the Conditions contained herein, extend to include loss or damage to the property insured (by fire or otherwise) directly caused by aircraft and other aerial devices and/or articles dropped therefrom”

One common myth about MCST (Management Corporation Strata Title) fire insurance is that my condo estate has bought the mandatory (by law) fire insurance, why would I still need to buy my own?

This insurance only cover reinstatement to the common areas of the entire estate, but not what’s inside the house. If the fire started from your house, engulfing whatever is inside and spreading to the common areas, the MCST fire insurance will only reinstate the common areas e.g walkways, lifts etc. Although some banks do not insist that you buy your own fire insurance, in my opinion, fire insurance is a must have even when you do not any housing loan left. After all, a 5 room HDB annual premium cost about $80 a year, a condo unit annual premium would be somewhere in the $200 range. I believe this cost is very affordable for everyone.

If you are thinking about saving a couple of dollars a month on fire insurance, i suggest that you think about it again.

Another important liability which most people missed out is Property Owner’s liability.

In shopping mall, you always see signs like “Wet Floor” “Renovation in progress, keep clear”, do you think the mall owners just want to tell you that the floor is wet or there’s renovation nearby? The actual fact is that they want to avoid being sued for damages. A shopper walks on the wet floor (no sign), slips and fell, hit her head and went into a coma, hospital bills came up to $50,000 when she woke up. Shopper sued the mall for damages.

All property owners by law are required to provide a reasonably safe premises for their visitors, the property owners should provide warnings wherever applicable (that’s why you see signs at carparks stating that they are not responsible for any mischief/willful damage on the cars parked in their premises). If someone scratches your car door in a carpark, you cant claim liability against the carpark owner as to why they did not employ security guards to look after the cars parked there.

The same goes for your own property, if you invite someone to your house, the liability falls on you and you cant be putting up signs everywhere in your house to warn your visitors of the perils right? Other than taking reasonable care to protect yourself from those liabilities, you should also get insurance to cover it. Like the MSIG standard enhanced fire insurance, with the $118.77 annual price tag, it also comes with Property Owner’s liability up to a million dollars coverage.

I believe the choice is pretty clear to getting fire insurance.

There is a legal case in the United States which i read a few years back, a burglar wanted to break in a landed house, before he reached the house, he was bitten by the dogs guarding the house. The burglar sued the house owner and he won the case because the owner did not put up signs warning there are dogs guarding the house. Really LOL.


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