Property Insurance II

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When it comes to the home, we value our most expensive possession. Previously talking about mortgage insurance/assurance, the importance of having a backup plan in times of trouble comes in pretty handy. However, insuring in oneself to settle the financial obligation is one matter. As for how normal insurance works, mortgage insurance is protecting only the insurer when unable to pay the loans. What about the home and the properties within it? Being left unprotected and unsecured could lead to a loss of assets in any uncontrollable events. Home insurance plays an important role in ensuring coverage and giving you the peace of mind. This article will explain the role of home insurance and how it works.

WHAT IS HOME INSURANCE?

Home insurance protects the home and the contents of the home. Just like how normal insurance works, it gives coverage of a definitive sum for a premium that the insurer must pay. For those homeowners living in strata titled property (apartment, flats, condominiums), the management will buy typical fire insurance and the owners just have to pay a premium (can be exempted with certain conditions). Although home insurance is not compulsory, those taking a loan financed property are required to do so too.

A special formula is used when claiming insurance. For example, a fire burned down the house. The rebuilding cost is RM400,000, in the event of a claim, the insurance company will apply the principle of average. If the sum insured is RM300,000 and the loss amounts to RM200,000, the average principle will be calculated as follows:

    \[ \frac{RM300,000}{RM400,000}\ \times RM200,000 = RM150,000 \]

This means the insurance company will only pay RM150,000 instead of RM200,000 for the loss.

There are 3 types of home insurance individuals can purchase, fire, house owner, and householder. All these policies have different coverages and different settings which can be applied to suit the owner’s needs.

  1. FIRE INSURANCE

This insurance policy insures material damage towards properties such as buildings, and contents such as household equipment, fixtures, and fittings. The policy covers the loss or damage caused by fire, lightning or explosion of domestic boilers or gas used for domestic purposes. This is the most basic of all house insurance, with coverage of the basic items. This policy’s coverage can expand to even include more with the price of an extra premium being paid. Examples such as:

  • Aircraft
  • Vehicles
  • Animals
  • Faulty pipes and water tanks
  • Faulty electrical appliances
  • Natural disasters
  • Landslides
  • Rental loss
  • Riots

Note. Check with the insurance company on whether they offer these protections as different insurance companies have different coverage and different ways of defining their coverage.

  1. HOUSEOWNER’S INSURANCE

This insurance policy protects the four walls and roof within which you keep your possessions, belongings, and items. It provides a more comprehensive and wider coverage for insurers and saves the owner the hassle of customizing the previous Fire Insurance plan. It covers almost everything mentioned in the fire policy, with the exception of landslides and riots, which can be bought at an extra premium. This policy is powerful, as it is based on replacement cost, meaning that in the event of a total loss, the policy will provide reimbursement, up to the policy limit. It can even be used to replace the structure where necessary or as stated in the agreement. However, this insurance is expensive and the value of buying this insurance can even cost as much as the value of the house itself. Hence, the popularity of fire insurance as compared to this.

  1. HOUSEHOLDER’S INSURANCE

As the most deluxe insurance policy, householder’s insurance covers a multitude, like the Houseowner’s insurance. It also covers almost everything mentioned in the fire policy, with the exception of landslides and riots, which can be bought at an extra premium. The difference between houseowner and householder insurance is the owner will be insured. Besides covering household contents, the householder includes coverage for fatal injury to the individual as the insured. It works similarly as a MRTA. Due to its extensive coverage, it is the most expensive but most secured.

VERDICTS?

Despite the many coverages, policies have many loopholes and criteria to be met before the individual is able to claim all these things. Also, every insurance company protects different things and have different definitions, which is important to note as it needs to be scrutinized. Besides that, a good tip is that homeowners must declare all their belonging that is under the insurance to ensure claiming purposes, as insurance companies might refuse to pay. In the end, it depends on the individual’s choice and preference. These policies are to suit the people and it should be tailored according to the needs and necessity. Always make sure that the property is properly insured at all times to avoid any regrets or heartbreaking moments.

 

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