While many clients try to buy home insurance in Hong Kong on their own, not all home insurance policies are alike and price isn’t the only factor. Here are 6 things you need to know when buying Home Insurance in Hong Kong.
There are many reasons why homeowners look for home insurance. For many people, your home is your single biggest investment and asset. As such, prudent homeowners will want to make sure it’s protected.
Another reason you might seek out home insurance is because you have a mortgage on the property. Almost all lenders will require proof that you carry adequate home insurance equal to the replacement value of your home before they would be willing to release the funds and you can close on the property. If they are lending you money backed by the value of the home, they want to know that the asset is protected should something happen to it.
While it may be tempting to purchase home insurance on your own, there are a few things you need to know about home insurance in Hong Kong:
Understand What is Covered
Because of the name “home insurance” many people think that it only covers their home. In fact, it covers much more than that. It also provides home content insurance and personal liability insurance.
On top of covering the dwelling building, it also covers the contents within. This includes things like appliances, electronics, furniture, clothing, and other personal items like watches and jewellery.
You also get liability coverage on a global basis. So if someone slips and falls in your house, you’ll be covered. If you are in a store or hotel room overseas and accidentally break some of the furniture, you are covered as well.
Home insurance does a lot more than just protect your most important asset. It’s an important part of your overall financial plan by protecting you from lawsuits and other personal liability issues as well.
Understand Who is Covered
On your policy, you may notice a section talking about the different insureds. These are people that will be covered under your policy giving protection for their liability and their property.
All policies will protect the named insureds but it also extends protection to 2 categories of people:
- Dependants under the age of 18 - the specific age limit can vary and there may be no age limit for dependants that are physically or mentally impaired.
- Dependants over 18 but enrolled in a post-secondary institution - these students are covered when they’re living in your household or while temporarily away (ie. if they are schooling in the US or UK).
- Immediate relatives of the named insured or their spouse.
Note that this does not include any tenants or roomers and boarders who are staying with you. Those would be considered tenants and they need to purchase their own tenant insurance policy.
Understand Your Contractual Obligations
Unlike automobile insurance, home insurance is not a mandatory requirement. That said, there are still certain contractual obligations you agree to when you purchase a home insurance policy. Your policy wording document will enumerate these obligations but one that many clients overlook is the requirement to report any material changes in property to the insurer.
When you purchase a home insurance policy, you - with the help of your broker - complete an application which gives the insurance company a way to understand and quantify the level of risk involved. This would include things like whether you have a tenant or run a home-based business.
Make sure you contact your insurance broker before you do any of the following things:
- Make renovations or improvements
- Start a home-based business
- Lease all or part of your property
This is by no means an exhaustive list of material changes but they are by far the most common ones. If you have a loss related to an unreported material change, your insurance company may not cover it so make sure you are in regular contact with your insurance broker about these things.
Ensure You Have Adequate Coverage
Contrary to popular belief, home insurance policies do not insure the market value of your home because that also includes the value of the land underneath it which isn’t really susceptible to loss. What you need to do is make sure you purchase enough insurance to replace everything you own in the event of a loss.
Make sure you complete a home inventory each year to ensure you have adequate coverage for your contents. Go room by room and tally up everything in there including appliances, furniture, electronics, clothing, etc. If you have high-value jewellery, fine art, or other similar items, speak with your broker about endorsing them separately.
When it comes to your building insurance, make sure you have enough limit to insure the rebuild value of your home. Most insurance brokers have sophisticated software tools that lets them estimate the cost of reconstruction on a per square meter basis which we use to advise clients on what limit they should choose for their home insurance policies.
Understand The Different Terms and Conditions
Many insurance companies say that they write their policies in plain language to help clients understand. But if you’ve ever read your insurance policy, you know that’s not true. There is a lot of legalese in there and insurance-specific jargon that you might not understand.
Without turning this into a whole insurance broker licensing course, here are some that are important for you to know laid out in layman's terms:
- Actual Cash Value: this is the value of the property with depreciation applied
- Replacement Cost: this is the value of the property without depreciation applied
- Deductible: this is the amount of a loss you have to pay for yourself before the insurer steps in to cover the excess
- Peril: this is the cause of a loss
- Hazard: this is something that might cause a peril to occur
If there’s ever a term on your policy that you’re not sure about, don’t hesitate to reach out and ask.
Understand What Influences Home Insurance Premiums
There are a lot of factors that can influence your home insurance premiums. Here is a brief list that may help you understand how insurance companies adjudicate risk and assign a value to things:
- Replacement Value - a more expensive home is likely more expensive to insure
- Location - homes in some areas are more susceptible to certain losses than in others. Insurers will look to see if your area makes your home more susceptible to things like fire, windstorm, etc.
- Past Losses - if you have a history of claims, this could indicate that you’re a higher risk client and your premium will have to be adjusted accordingly
- Occupancy - this refers to how your home will be used. A home that will be used as a principal residence will be cheaper than one that is rented out, used as a vacation property, or is vacant.
For a detailed quote, contact a licensed Trusted Union home insurance advisor.
Home Insurance in Hong Kong Comparison
Not all home insurance policies are alike and there are numerous subtle things that can make all the difference to what losses are and aren’t covered.
With so many subtle differences, it pays to get expert advice to protect your biggest investment. For help with your home insurance policy, speak with a licensed home insurance advisor at Trusted Union for no-strings-attached quotes and expert advice.
