Unfortunately, many of us like James are unaware whether we have bought adequate cover for our home investment and whether we have taken up the appropriate insurance covers that best meet our needs and requirements.

To help us in our decisions, it would be best to understand the different types of property insurance covers that are available to us and under what circumstances can we be underinsured.

Types of property insurance

In Malaysia, there are three types of property insurance covers available for house owners to select from:

• Fire insurance
• Houseowners' Insurance
• Householders' Insurance or content insurance

Fire insurance is designed to provide protection against material damage to properties such as buildings, contents such as household equipment, fixtures and fittings. The policy covers the loss or damage caused by fire and lightning or damage caused by explosion of domestic boilers or gas used for domestic purposes. However, the policy may be extended to cover other perils such as:-

1. Riot and strike
2. Malicious damage
3. Aircraft damage and articles dropped therefrom
4. Impact damage (excluding own vehicle)
5. Bursting and/or over flowing of water tanks, apparatus and pipes
6. Earthquakes, volcanic eruption, hurricane, typhoon, cyclone, windstorm
7. Flood

The Houseowner's Insurance cover is a comprehensive insurance policy specially designed for owners of residential properties. It covers the building against loss or damage caused by all the perils covered by the fire policy except riot , strike and malicious damage.

In addition, the policy also covers:

1. Theft accompanied by forcible entry
2. Loss of rent if building is damaged and rendered uninhabitable
3. The insured's liability to the public in respect of bodily injury and damage

This policy may also be extended to cover:

1. Riot and strike
2. Malicious damage

The Householders' Insurance cover is almost identical to Houseowners' Insurance, but the protection is meant for the contents and not for the building. This policy would also be appropriate to renters as the landlord's policy only covers the building and not the possessions of the renters.

While it is true that one of the basic principles of insurance is indemnity ie. one should not profit from an insurance claim, insurers have introduced the Reinstatement/Replacement Value Clause to meet the needs of consumers to conveniently replace or reinstate loss or damaged properties covered under a fire, houseowner or householder policy.

The clause provides payment of claim due to an insured peril without deduction for depreciation for age or wear and tear. In other words, the full cost of repairs or replacement will be met subject, of course, to the condition that the sum insured of
the properties is adequate to cover the total cost of repairing or reinstating the building or insured properties at the time of the loss.

If the properties are underinsured, the insured will be compensated only in the proportion of the sum insured to the actual value applied to the full repair or replacement cost. In insurance terminology, the insurer is applying the principle of 'average' when this takes place.

Ways you can be underinsured

You have underinsured on your property insurance if you have:

• Based your fire or homeowners insurance on the current market value instead of on the cost to replace it. 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.

• Not taken a periodic inventory of all your possessions.
  When renewing your householders' insurance, it is advisable to take an inventory of all your possessions. This list will adequately reflect how much coverage is needed to replace all the contents in your home.

• You may also be underinsured, if you did not take up additional coverage for valuable items such as artwork, jewellery, antiques or collectibles. For this instance, an 'All Risks' insurance policy can be effected to cover the valuables on an indemnification or more usually on an 'agreed value' basis against any loss or damage. The 'All Risks' cover has a list of specified exclusions.

Most insurers will demand a valuation before agreeing to insure any items of high value.

• Current insurance policy that does not reflect recent improvements or additions to the home and increases in inflation.
• You could be underinsured if you have not taken into account and reported any recent improvements to your home, such as an additional room or remodeled kitchen, to your insurer.

If you have a claim, the more information you have about the damaged items -- a description of each item, the date of purchase and purchase price -- the faster the claims can be settled.

Please send your questions on general insurance to:
Persatuan Insuran Am Malaysia,
3rd Floor, Wisma PIAM, 150, Jalan Tun Sambanthan,
50470 Kuala Lumpur.
Tel : 03 - 2274 7395/9
Fax : 03 - 2274 5910

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