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Home Insurance

The incidence of fire outbreaks in Singapore is at a seven-year low but the number is still significant, said financial experts.

Most of us tend to take the safety of our home and its contents for granted. This means that we either do not have home insurance or, for those who do, the cover is likely to be inadequate.

Last year, the number of fires fell by 12 per cent to 4,600, according to the Singapore Civil Defence Force (SCDF). About seven in every 10 fires, or a total of 3,267, broke out in residential areas.

Homeowners should take note that rubbish chute fires are the most common type of residential blazes and there were 1,241 of these last year.

What might turn out to be an emerging trend is the 24 per cent rise in fires started by discarded objects such as furniture, mattresses and newspapers. Such fires accounted for 25 per cent of all residential outbreaks. The problem can be partly attributed to the residents of small flats who often use the common corridor as storage space.

More than half of all fires were caused by unextinguished cigarette butts, lit incense sticks and lit matchsticks being disposed of inconsiderately.

The above statistics point to the alarming fact that such mishaps do happen, even in a city state that we regard as a safe haven.

Besides going up in smoke, a home may also be burgled. Last year saw nearly 900 cases of housebreaking and related crimes.

Financial experts’ advice is to ensure sufficient home insurance coverage which typically covers the damage caused by fire and other things such as lightning, floods and theft. For a higher premium, you can obtain cover for accidental loss or damage as well.

For homeowner Pang Kheng Inn, 52, his Axa SmartHome Optimum plan came in handy when his HDB maisonette in Aljunied was damaged by a fire in March this year.

He claimed a total loss amount of $50,000 under his insurance plan. It included the cost of restoring his flooring, electrical wiring, toilets and air-conditioners.

‘The fire had started in my mother-in-law’s room, which suffered the worst damage. The report from SCDF stated that the fire was caused by some old, faulty electrical points,’ he recalled.

All the contents of his mother-in-law’s room such as her passport, identity card, cash savings, jewellery, including pieces of jade, and watches were either totally burnt or damaged. The fire also damaged the room’s air-conditioner, which affected the other three air-con units upstairs.

The damage to the contents of his mother-in-law’s room was between $8,000 and $9,000 of the total loss. Mr Pang pays about $100 in annual premiums for his policy, which covers the building including fixtures, fittings and renovation. In his case, the sum assured was $110,000.

For those shopping for a suitable home cover, here are some considerations.

1 Risks covered in home insurance

Fire insurance is a basic protection cover and it covers the building and/or its contents.

According to the General Insurance Association (GIA), fire insurance generally covers the building structure, the permanent fixtures and fittings such as built-in cabinets, baths, toilets, air-conditioning units, fixed carpet, parquet flooring and other immovable decorations or improvements.

It may extend to cover outbuildings such as garages, covered porches and perimeter walls. However, foundations and swimming pools are normally not covered under fire insurance for buildings.

Most fire insurance for buildings provides cover against damage caused by fire, lightning, domestic explosion, bursting or overflow of water tanks and apparatus, road vehicle impact, aircraft impact, malicious intent, riot and strike, earthquake, windstorm and flood, theft or attempted theft accompanied by forcible or violent entry.

Depending on the insurers, other perils such as subsidence and landslip due to windstorm and flood may also be included.

2 Valuing your property

When determining the amount for which to insure your property, seek the assistance of a qualified property valuer or quantity surveyor. The rule of thumb is that the sum insured should be the replacement cost of your property or building should it be completely destroyed, said Ms Elizabeth Goh, French insurer AXA’s underwriter for home insurance.

To help homeowners estimate the sum insured, GIA’s website www.gia.org.sg provides a guide in the form of a replacement cost table. The latter is based on the gross floor area and the type of development for private residential homes.

GIA highlighted that it is equally important for the property owner to insure professional fees and removal of debris/temporary works.

‘In the event of a fire, the bills of these two items can be very substantial and the property owners will have to dig into their savings to pay for these bills, if not insured,’ the association said.

Such items are not covered unless specified in the policy as many property policies insure only the cost of rebuilding the property.

3 Average clause

Most home insurance policies carry an average clause which takes effect if you are under-insured. The principle behind the average clause is that the insurers can reduce payment on a claim by the percentage you are under-insured. This is the case for home insurance that covers both the property and its contents.

Let us assume Mr Robert Tan (not his real name) has a total of $20,000 worth of items in his house but he insured the contents for only $10,000. His house was burgled one evening and he lost $5,000 worth of items. Mr Tan submitted a claim for $5,000, but, to his surprise, the insurer refused to pay the claim fully.

By insuring the contents of his house for only half of the correct value, the insurers would award Mr Tan only half of the claim, reducing it from $5,000 to $2,500.

This goes to show that it is very important to get the sums insured right on any policy.

As the cost of home insurance is usually low and affordable, GIA pointed out that the risk of homeowners under-insuring their property and contents outweighs any savings.

4 Protecting your valuables

Note that home insurance generally has a sub-limit for unspecified items. So if you have expensive jewellery, watches or art pieces, you are advised to declare this to your insurance firm and provide proof of the item’s existence by showing a copy of the receipt and its value.

Most insurers will insure your valuables either as a specific item, or as a blanket under a worldwide cover. The latter ensures that even if you were to lose the insured item while overseas, you will still be covered.

5 Common exclusions

Among the common exclusions are war and terrorism risks, nuclear risks, subsidence or landslip except when it is a result of earthquake or volcanic eruption. Also excluded are contents such as deeds, bonds, stamps, bank notes, manuscripts, medals, coins, cheques and documents of any kind, and deliberate damage or loss, said GIA.

If you are living in a flood-prone area, some insurers may decline cover or increase the premium, cautioned Axa. They may also exclude damage arising from wear and tear, or any unexplained loss or mysterious disappearance of contents. And if the property is going to be vacant for a long period of time, expect the insurers to ask how long it will be unoccupied.

6 HDB or condominium management corporation

It is a common misconception that you need not buy other types of home insurance if you are already protected by the HDB or condominium management’s fire insurance.

Axa highlighted that, in reality, this fire insurance is usually very basic and covers only the physical structure of the flat.

‘It only includes the four walls of the flat and perhaps limited fixtures and fittings. Also included are the building and facilities such as the condo’s swimming pool,’ said Ms Goh.

‘The actual contents of the house and renovation costs are not usually covered.’

So HDB or condominium owners should also consider taking up additional insurance that covers their contents and renovation costs to protect against any unforeseen circumstances such as theft, and not just fire

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Business Insurance

Have you ever considered whether or not your business could continue without you or your key employees? “Keyman Insurance” is an insurance policy designed to financially protect a business from the effects of prolonged illness or death of important employees of a business. Read this article to find out how your business can benefit from keyman insurance.


Different professions hold different views on the definition of the term “Assets”.

Ask any accountant and they’ll probably tell you: “Assets = Liabilities + Owners’ Equity”.

Many business owners consider: “Assets = Customers + More Customers + Even More Customers”.

Being a lawyer, my definition of the term “Assets” comprises: “Assets = Anything which is of value”!

From small firms to large companies, almost every business has some form of insurance of their physical assets such as its manufacturing facilities, plant and machinery, stock inventory and office premises to mitigate potential financial losses through natural and man-made disasters.

But, we notice that very few companies cover themselves against loss of their most important asset – the “Key Executives” of the company – the person(s) at the helm who perform critical roles of financial, business and strategic management of the business; and whose presence in the business ensures its continued success.

If you are a sole proprietor, have you ever considered whether or not your business could continue without you? If you are a business owner, have you ever considered what will happen if one of your key employee is unable to work?

“Keyman Insurance” is an insurance policy designed to financially protect a business from the effects of prolonged illness or death of important employees of a business. While the insurance is unable to provide the business with an equally capable replacement employee, it is able to provide a cash injection for the critical interim period while the company recovers from the devastating loss of the critical employee.

Who is a Key Man?

A Key Man is someone who plays a very important role in the business, usually someone whose portfolio relates directly to profit generation. The general rule for deciding whether or not a person is a Key Man is simply to ask the question whether the business would suffer if this person is unable to show up for work.

How Does It Work?

Keyman insurance falls within the umbrella of “Business Protection Insurance”. As such, there are many different types of Keyman insurance; the most common being “Profit Protection Insurance” which pays out a cash sum to the business if a key employee is unable to work due to death or critical illness.

Studies have shown that 50% of small business owners expect their business to fold within 12 months of losing a key employee while a higher percentage expect their business to come to a serious struggle. Keyman insurance provides such small business owners with peace of mind – knowing that in the event that they lose a key employee, they would have a fall-back mechanism that provides funding to tide them over the crisis.

Do I need Profit Protection Keyman Insurance?

A simple way to determine whether or not you need a Keyman insurance policy is to answer the following questions:

• Do you have at least 1 key person in your business?
• Would the loss of this key person have a serious impact on your business?
• How many employees are there in your business? The fewer employees, the more reliant your business is on certain key persons.

Who needs Profit Protection Keyman Insurance?

From small firms to large companies, all types of business can enjoy the benefits of Profit Protection Keyman Insurance. However, business owners of partnerships and corporations should take note that if their main concern is for ownership protection, it is more useful to obtain ownership protection insurance (Read our article “Business Succession Planning”).

What’s the Difference Between Critical Illness/Life Insurance & Keyman Insurance?

A common misconception amongst business owners is that critical illness policies and life insurance policies, being of much lower costs, offers the exact same benefits as Keyman Insurance. In reality, they offer vastly different benefits and it is the benefits that justify the difference in the insurance premiums.

Critical illness and life insurance policies, while premiums are much lower, are personal policies and will pay out on the occurrence of the stipulated event, i.e. critical illness or death.

Keyman insurance policies, on the other hand, being a corporate policy would pay out on the occurrence of events detrimental to the business. Such events include when the key personnel is unable to work for whatever reasons.

When Should I Buy Profit Protection Keyman Insurance?

Procrastination is a vice most of people share, and that includes many small business owners, no matter how shrewd they may be. Unfortunately, in the area of business planning, it can lead to their financial undoing.

Many owners of successful businesses put off identifying their key assets until it’s too late. In short, the time to buy Profit Protection Keyman Insurance is now!

Chris Chua has over 10 years’ experience in commercial and corporate legal practice. She has the primary responsibility for undertaking general corporate work for long-standing clients; including buy-sell agreements; shareholders and partnership agreements; employment contracts; and distributorship and agency agreements.

Her experience in financial advisory work extends to trust deeds and prospectuses for collective investment schemes, including Central Provident Fund Investment Schemes and Supplemental Retirement Schemes; licensing of capital markets and financial intermediaries; and documentation related to convertible redeemable loans. As legal counsel to a number of significant companies, she has been responsible for drafting memoranda on capital markets and licensing of financial intermediaries and ensuring regulatory compliance of unit trusts.

© Copyright Chris Chua & Associates

Copyright Chris Chua & Associates
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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