Homeowners Should Opt for Better Home Insurance

When giving out home loans, all banks in Singapore require the homeowners to take up basic insurance coverage against domestic fire.

This is seen by the lenders as a way to protect themselves rather than the homeowners.

But industry players say homeowners should in fact be encouraged to upgrade to a more comprehensive policy.

Most potential homeowners are just too happy to have their housing loans approved to notice the attached fire insurance policy that comes with all loan documents.

Basic fire insurance is usually given free to borrowers for the first year of the loan, while some banks offer them free for up to five years.

Among other things, it insures the property against damage caused by fire and lightning, and water damage due to bursting or overflowing water tanks.

The need for a fire insurance applies to HDB flats as well.

A check with the Monetary Authority of Singapore shows that there is no legal requirement for borrowers to take up this coverage.

But the Association of Banks in Singapore says lenders insist on it to protect their financial interest should the properties be damaged.

They ask for the sum assured to be sufficient to reinstate the property to its original condition.

So the annual premiums are relatively low ranging from tens of dollars to hundreds of dollars.

The banking association says borrowers can choose an insurer of their own choice, but that could mean higher premiums as banks would usually negotiate for a bulk rate with insurance companies for the benefit of their customers.

The association also advises house-buyers, who would like to protect their investment and contents in the house, to consider a more comprehensive policy.

A check with insurance companies show that with a slightly higher premium, homeowners would be able to get a more comprehensive coverage for their home insurance.

NTUC Income told Channel NewsAsia it currently has some 40,000 home insurance policies in-force.

Its basic coverage also includes theft and burglary, which makes up the bulk of the 260 claims over the past three years. Industry observers say borrowers should be informed of limited coverage under the basic fire insurance and be given the choice for an upgrade to a more comprehensive policy that takes into account the interests of both banks and consumers.

Source: Channel NewsAsia, 11 July 2006

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