Owning a home is a big responsibility (and often an expensive one); but it’s such a big milestone that not many of us get to achieve in this lifetime.
However, there are many things that can quickly turn a worthwhile investment into a financial disaster.
The forces of nature will not have mercy on you just because you’ve finally settled down in your dream home.
It’s not just about money either; if you have a family and children, keeping them safe is your number one priority; and this includes making sure there’s a roof over their heads.
This is where home insurance comes in.
Regardless of whether you’re already a long-time home owner or a prospective one, this article can greatly benefit you.
Read ahead to find out more about home insurance and the types of insurance plans you can choose for your humble abode.
Why is Home Insurance Important
To put into simple terms, home insurance is a form of protection for personal property.
Like all forms of insurance, you pay a certain amount every month to an insurance company, along with thousands of other insurance holders.
The pooled resources mutually benefit anyone who is part of the collective, helping compensate for any loss or damage that one member experiences.
If you own a house or several, having home insurance ensures that should any damage occur to your property, you will have some additional money to make repairs or to buy a new one.
Any physical property is susceptible to what we call “perils”: natural disasters, burst pipes, fire, lightning, etc.
Having a home insurance “ensures” that should these perils inflict your beloved home, the insurance company will pay a hefty sum to reverse the damages.
The Types of Home Insurance
There many ways to protect your property in Malaysia if you’re a home owner, but these are just the most common and popular ones.
They are fire policy, houseowner policy and househlder policy.
The last two may sound the same but trust me they are different and all will be explained.
Let’s start unpacking each of these home insurance policies one by one.
Fire Policy
Despite its misleading name, the fire policy is the most basic protection you can have for your property.
While it does protect the building from any loss or damage as a result of a fire (electricity, explosion, domestic/kitchen accidents, etc.), you can also request for additional covers.
These covers include floods, landslides, storms, and other natural disasters.
This policy only protects the infrastructure, the walls, floor, ceiling, etc., any contents (furniture, personal belongings) or fixings are not included.
Houseowner Policy
Houseowner policy covers a bit more than fire policy.
The fire policy protects the physical building, but with the houseowner policy, the insurance company will also compensate for your fixtures and fittings (think plumbing, cupboards, electric sockets, satellite dishes, security alarms).
So this adds another layer of cover to your insurance plan.
However, unlike the fire policy, the houseowner policy may cost a little bit more.
Be sure to read the clauses though, some insurance companies have a very short list as to what fixtures they will reimburse.
The same goes for the “perils” that are covered in these insurance plans. If you’re in a flood prone area, like say the East Coast, make sure “flood” and/or “water damage” are listed.
Otherwise, you won’t get your money’s worth.
Householder Policy
Householder policy on the other hand, only protects your belongings and possessions; the actual contents of the house.
The physical infrastructure or property is not included in the plan.
Take note though, this kind of policy is susceptible to “depreciation“, whereby objects that have lost or decreased value in recent years (like a 10-year-old refrigerator for instance) will only be reimbursed based on their present value.
So even if you bought that fridge 10 years ago for RM5000, the insurance company may only pay you RM1000 for it.
Depending on your needs, you may want to purchase more than one kind of insurance plan.
However, if you’re renting, be sure to ask your landlord if your rental is insured (chances are it probably is).
So in this case, the only insurance you need to take out may just for your furniture, personal belongings and other similar items.
Compensations, Covers and Add-Ons
Compensation refers to the money the insurance pays when your property is damaged; terms and conditions applied of course.
Which is why you should always read the fine print.
For instance many insurance companies will reimburse you in two ways: reinstatement or indemnity.
In reinstatement compensation, the insurance company will reimburse you with the full value of the item, no questions asked.
For indemnity compensation, the insurance company will take into account the depreciation of the item or property, which I’ve mentioned previously in the refrigerator analogy.
Some insurance companies also offer additional covers in their home insurance plans, so its important to ask about them.
These covers will cater to your special needs. Some common add-ons include mortgage loan insurance, landlord insurance (if you’re renting out property) and home maintenance insurance.
Revising your Home Insurance
Say you already have home insurance, this doesn’t necessarily mean you should stick to the same plan year after year.
It’s good to revise your current insurance plan every now and again especially if your home has changed, or if you’ve taken on extra responsibilities related to your status as a home owner.
For instance the price of your home could have gone up (or down) since the last time you bought it.
This goes for any renovation or damages that may increase or decrease the value of your home.
So its important to adjust your plan according to these changes so you don’t under or over-pay for your insurance.
You may also have new equipment or features added to your home that may pose certain dangers; think trampolines, swimming pools, and gym equipment.
New and expensive furniture can also be included under compensations.
Another thing to note is that if you have somehow become a renter or a business owner, your insurance plan also needs to be revised to fit these new changes.
Protecting Your Property
One thing to note before buying your first home insurance is to go “window shopping”.
Enquire at as many insurance companies as you can. Learn about what they offer, as well as their fine prints and hidden clauses.
The tips mentioned are merely a general overview of home insurance in Malaysia in general.
Each company may have glaringly different policies and covers for their customers.
The cost of add-on policies and premium plans can also depend on the value of your property.
These factors determine how much an insurance company will charge you for their plans, so be wary of these things.
Insurance companies mean well, but at the end of the day, they do want to make the most money out of you.
Hopefully, you’ll find the ideal insurance plan for your home. When you do, you can go to sleep each night knowing you and your property are sufficiently protected.
As they say, “hope for the best but prepare for the worst”.
And nothing says preparation like a good home insurance plan.
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