How to Find the Best Home Insurance
Choosing home insurance can be a tricky task, especially because it involves protecting one of your most valuable financial assets. To help you sort through all the different options in the market, below we discuss a few factors you should consider when looking for the right home insurance policy that suits your needs.
Table of Contents
How Much Coverage Should I Get?
When looking for the best home insurance, it's important to find a balance between getting the lowest price and getting an appropriate amount of coverage for your home's renovations and contents. This is because of a concept known as "under-insurance." Unlike life insurance, home insurance protects assets that have numeric values, and insurance companies expect your sum insured to match the value of your properties. If your policy's sum insured is meaningfully lower than what is actually covered, insurance companies can penalize you in the form of reduced reimbursement when you file a claim. Finding the appropriate amount of "total sum insured," however, may vary depending not only on whether you are an owner-resident, a landlord or a tenant, but also on the size of your home.
Owner-Residents
In most cases, homeowners should already have their buildings covered by an insurance policy either through an HDB fire insurance or their condo's Management Corporation Strata Title. When shopping for a separate home insurance, therefore, homeowners should look to optimise their sum insured around their home renovations and contents.
Home insurance policies tier their coverage either by the size of your home or by total sum insured for specific categories like home renovation and home contents. For a typical 4-room HDB, owners should look for S$40,000 to S$100,000 of renovation coverage and S$30,000 to S$50,000 of home contents coverage. This should work for most people since the average cost of renovation is around S$55,000.
This coverage estimate may go up by about 70% if you own a private property. Also, you might find some policies that are specifically designated for HDB or private homeowners only. In such cases, you have to be careful about whether or not the deal is available to you in the first place. Finally, you might need to pay for a separate building coverage if you own a landed property, don't have a mortgage on your home, or if you are taking up bank loan to purchase a new house.
Once you've figured out the approximate amount of sum insured for your home, the next step is to find the cheapest policy that provides the said amount. For example, some of the best home insurance policies for a 4-room HDB cost less than S$80 per year while covering around S$125,000 of renovation and home contents, yielding the value ratio of S$1,600 sum insured per dollar of premium. This compares with the industry average premium of S$145, S$180,000 of coverage, and a much lower ratio of S$1,300 insured per dollar premium.
| Property Type | Renovation Coverage | Content Coverage | Price Range | Typical "Good" Ratio |
|---|---|---|---|---|
| HDB 3-Room and Below | S$20,000-80,000 | S$15,000-40,000 | S$40-180 | 1,500-2,000 |
| HDB 4-Room | S$40,000-100,000 | S$30,000-50,000 | S$55-270 | |
| HDB 5-Room and Above | S$60,000-150,000 | S$50,000-100,000 | S$88-535 | |
| 2 Bedroom Condo | S$50,000-100,000 | S$30,000-50,000 | S$45-200 | 1,200-1,800 |
| 3 Bedroom Condo | S$100,000-200,000 | S$60,000-100,000 | S$50-3285 | |
| 4 Bedroom Condo | S$200,000-300,000 | S$100,000-150,000 | S$80-530 |
Landlords
Because landlords may not rent out their flats fully furnished, they typically do not require contents protection. Therefore, the only thing that landlords need to insure is the cost of replacing their home renovations in case they get damaged. By opting out of contents coverage, landlords will spend 80% less on home insurance compared to a typical homeowner who opts for both contents and renovation coverage. Landlords should also purchase additional building coverage if the building is not already covered.
Home insurance policies for landlords are offered on the basis of how much coverage you need on the fixtures and fittings you've added to your home. Some of the major components of home renovation includes demolition, plumbing, electrical, flooring and tiling, all of which need to be taken into consideration when calculating how much building and renovation coverage you'll need. For a 4-room HDB flat, landlords should typically look for S$40,000 to S$100,000 of renovation coverage. This should work for most people as the average cost of renovation is around S$55,000 .
| HDB Flat Type | Renovation Coverage | Price Range | Typical "Good" Ratio |
|---|---|---|---|
| 3-Room and Below | S$25,000 | S$6-35 | 2,500-4,000 |
| 4-Room | S$50,000 | S$12-45 | |
| 5-Room and Above | S$75,000 | S$18-55 | |
| Private properties: Most plans charge the same price for both HDB and private property landlords (with some exceptions). | |||
Tenants/Renters
Tenants should purchase protections for their belongings in the premise, but not necessarily for the fixtures and fittings that belong to the landlord. Therefore, tenants typically spend 30% less on home insurance compared to typical homeowners since they'll only need contents coverage.
Determining the appropriate level of coverage can be tricky, especially if you are a young tenant temporarily residing in a rental property. Therefore, we advise you to compile a list of what you own and their respective values in order to determine the amount of coverage necessary to protect your belongings in the premise. Beds, microwaves, dishes, electronics, shoes and clothes, and food in the refrigerator are some examples that can make their way onto the list.
In general, S$10,000-25,000 of coverage should be sufficient for tenants in 3-room HDB flats and smaller (or their condo equivalents). The price you have to pay to enjoy this benefit is around S$35, although it can become more expensive if you have lots of valuables to protect. Below we show the range of costs and coverage for a typical tenant residing in an HDB flat.
| HDB Flat Type | Content Coverage | Price range | Typical "Good" Ratio |
|---|---|---|---|
| Studios & 2-Room HDB | S$10,000 | S$15-40 | 700 |
| 3-Room | S$20,000 | S$30-75 | |
| 4-Room | S$40,000 | S$45-110 | 1,000 |
| 5-Room and Beyond | S$60,000 | S$60-160 | |
| Private properties: Most plans charge the same price for both HDB and private property tenants (with some exceptions). | |||
Other Considerations
Home insurance is a complex product that comes with a lot of caveats. One such example is that your property should not be left unoccupied for more than 60 days in order to be eligible for protection in the first place. There are myriad of other considerations that might impact your decision. Below we discuss some of these important distinctions you might want to know to make an informed decision.
Fixed vs. Flexible vs. Top-up Schemes
Most insurance companies offer tiered policies, meaning all of the main features (amount of coverage on renovation and content, specific sub-limits etc.) are fixed and packaged into a product. A typical naming scheme you will see is based on the size of your HDB, or is separated into Standard, Deluxe, Premium tiers. Many policies for homeowners come in this form.
Flexible plans allow the policyholders to choose their desired levels of coverage on renovation and content. Premiums will increase proportionally to the amount insured, usually by a multiple of S$10,000. Most insurance plans for tenants and landlords come in this form, but some homeowner's policies are offered in this way as well (e.g. Income).
Finally, there are plans with top-up options. This is a hybrid of fixed and flexible plans, whereby you can "top up" additional coverage as you desire on top of an existing plan. Under this scheme, you will pay for the existing policy's premium plus the charges on additional coverage you've specified. Typically, homeowners with large coverage needs may find this option useful. Also, if you own a landed property, you should take advantage of the building top-up option that allows you to enjoy the same coverage that the product offers, plus the protection on the building structure.
Combined Coverage
You might find that some policies combine the renovation and content coverage. In general, combined coverage means greater flexibility in using your claim. For example, a plan with a combined limit of $100,000 can be more helpful than a coverage of S$50,000 each for renovation and content if you incur a single damage of $80,000 on your renovation items and S$20,000 on your home content. However, these policies tend to be pricier per dollar of sum insured to compensate for the added benefit of this flexibility. As such, the combined scheme might or might not work in your favor depending on the situation.
Content Sub-limits
Not all policies with high sum insured per dollar premium are the best. Most valuable items have sub-limits, meaning your insurance company will limit how much they will reimburse for certain items that are too expensive, or can easily be damaged or stolen.
Below we present a short list of items on which insurance companies usually impose sub-limits, as well as the typical coverage you can expect. To ensure your insurance policy offers sufficient coverage on items that are important to you, we recommend that you carefully read the policy wordings.
| Sub-Limit Benefits | |
|---|---|
| Alternative Accommodation | 5-15% of combined renovation and content coverage |
| Locks and Keys | S$500 |
| Food | S$750 |
| Legal Documents | S$500 |
| Money | S$750 |
| Laptop/Desktop | S$2,000 |
| Valuables | 10-35% of Content Coverage |
| Pets | S$500 |
Coverage Other Than Renovations or Contents
In addition to the standard protection on renovations and contents we discussed above, your insurance policy typically comes with some extra features designed to insure against broader types of mishaps. Two important examples are legal liability and family death and injury.
Legal liability coverage insures against situations in which you might be legally held responsible for. For instance, if a visitor trips over while walking in your home, you might be held responsible for the accident as an owner. Legal liability coverage is especially important for renters, as you might be responsible as a tenant if, for example, you break a china that belongs to your landlord. A typical coverage amount is S$500,000, though the actual amount may differ depending on your policy.
Family death and injury is a bonus feature that compensates you if life-threatening mishaps occur to your family. Typically, this feature pays about S$20,000 for the death of an adult, S$10,000 for a child, and is capped at an overall limit of around S$50,000. Insurance companies have different rules about where exactly the "death and injury" may happen, whom "family" refers to (spouse only, or up to a certain number of children), and the types of injury that qualify as a covered event.
Parting Thoughts
With hundreds of options out there in the market, choosing the right home insurance can be a challenge. We recommend that you first determine what type of coverage is relevant to you using the framework we provided above. Then, estimate the adequate amount of coverage you need, while making sure you are not under-insuring your property. We reiterate this point because under-insurance can cost you a lot. For example, if you purchase a S$10,000 coverage on a S$40,000 home, your insurance company will determine that your property is under-insured by 75%. In this case, you will get paid only S$1,000 even if you file for a claim for a loss of S$4,000, because you will be responsible for the remaining portion (75%) of the claim.
Finally, we've illustrated some ways in which home insurance offers are structured. We recommend that you screen for policies that delivers high value, suits your situation, and offers high sub-limits on items that are important to you. With this approach and framework in mind, you should be ready to shop for home insurance policies to safeguard your home assets.