Your home is probably one of the most expensive things you buy in your lifetime. Hence, it makes sense to insure your home to protect your assets. However, there are various insurance available to cover your home, such as fire insurance, house owners’ insurance and householders’ insurance or content insurance.
Malaysia, being a country outside the Pacific Ring of Fire is exempted from natural disasters such as earthquakes and volcano eruptions that often cause loss of life and destruction of properties. But, despite being strategically located, Malaysians are still susceptible to losses caused by fire.
This has led to the uptake of fire insurance by some, but for many the question as to whether fire insurance in Malaysia is necessary remains a question demanding an answer.
What is it and what does it cover?
In Malaysia, it is a regulated class of insurance that functions just like any other policy one would take-up where it is designed to compensate the policyholder in the event of loss and/or damage caused to the insured property. This compensation usually covers the cost of reconstruction, replacement, and repair of damaged property.
The most basic policy usually covers damages caused by fire, lightning, and explosion but can be extended to include perils, such as storm and tempest, flood, riot, and even damages caused by smoke from the fire, and damages caused by water or other extinguishing agents used to put out the fire. Extending the coverage of your policy will however increase the premium you would have to pay for the policy.
Though it is generally a building insurance, the following items can also be insured:
- Building, renovation
- Furniture, fixtures and fittings
- Personal effects and household goods
What to do if you are planning to take it up?
Much like with any other type of insurance, the onus falls entirely on you to undertake the necessary research required as to the extent of coverage you want (and want to pay for). Here are a few things to consider before taking up fire insurance for your property:
- Type of property: If you are an owner of a non-landed property, chances are that the management of your building has already purchased a fire policy and is charging you through maintenance fees. If this is the case, either forego your plans of taking up another one or consider other protection plans to supplement the existing one.
- Determine your risk appetite: This is more of an evaluation of one’s self than it is a consideration of the steps to take before taking up the policy. If money is tight and you are comfortable doing without one (for the time being) then maybe it is wiser to park your money in an investment that yields profitable returns instead.
- Evaluate the location in which your property is located: Doing so may help you determine the extent of your coverage. Fire coverage can be extended to include other perils providing you a more comprehensive coverage if your property is exposed to more risks due to where it is located.
- Document the contents of your property: Fire coverage often covers the cost of replacing damaged furniture, fixtures, household goods, and personal effects. It is wise to document these items to facilitate the determination of value and to expedite claims.
- Determine the appropriate sum insured: It is important that you factor in the cost of rebuilding or repairing your property when determining the sum insured. Ask your neighbours with fire coverage for a ballpark figure, then increase or decrease that amount to suit your own property.
What type of policies are available in Malaysia?
According to PIAM (Persatuan Insurans Am Malaysia), these are the common policies available:
Basic Fire Policy – covers against loss or damage to insured property caused by fire, lightning or explosion.
Houseowner Policy – offers additional coverage to that provided in the basic fire policy, including loss or damage due to flood, burst pipes, etc.
Householder Policy – cover your household contents and includes coverage for fatal injury to you as the insured but it does not cover damage to the house itself.
All Risks Insurance – this covers losses or damages to your property due to fire, theft or any other accidents or misfortunes including those caused by perils except the risks and perils which are specifically outlined to be excluded in the policy.
How do you avoid underinsuring on your fire insurance?
1. Insure based on the cost to replace your home instead of on the current market value.
For example, if the selling price of your home is lower than it was when you first bought it and you have based your insurance on the current price, you may be underinsured.
2. Take a periodic inventory of all your possessions.
It is advisable to take an inventory of all your possessions to adequately reflect how much coverage is needed to replace all the contents in your home.
3. Take up additional coverage for valuable items.
If you store valuables such as artwork, jewellery, antiques or collectibles, this step is important. For this instance, an ‘All Risks’ insurance policy can be purchased to cover the valuables on an ‘agreed value’ basis against any loss or damage.
Most insurers will demand a valuation before agreeing to insure any items of high value.
4. Report to your insurance company any recent improvements.
If you have invested extensively in upgrading to your home, such as an additional room, a new floor level or re-modeled kitchen, then the value of your home may have increased.
Like any other insurance policies, having one is always better than not, especially if you live and die by the saying ‘better safe than sorry’, and if you are financially capable of maintaining one.
The point ultimately, is to decide what suits your needs the best and to make an informed decision while avoiding unnecessary risks and costs.
This article was first published in January 2014 and has been updated for freshness, accuracy and comprehensiveness.
