reduced and recycled

I’m not good at writing disclaimers, but I’ve heard yet another bloody complaint today. Well, not actually a complaint, more of a story, and one I’ve heard many, many times before. It’s not advice, so don’t treat it as such - so please don’t base your actions on what I’ve written here. How’s that for a disclaimer?

Anyway, if you have a mortgage on your house, you will have an insurance policy on your house. Usually, the bank will insist on a policy, and then make you pay for it. You must understand one thing: banks will insure your house because they just want to protect their interests. It’s not out of good will or fellow-feeling, or any sympathy. It’s just plain risk transfer.

Now that we’re past that, the way bancassurance works is, banks usually have one or two tie-ups with insurance companies with whom the banks will arrange insurance. When your loan’s approved, the banks will arrange for insurance on your house - or more specifically, they will arrange insurance on the loan amount. You see the difference? A few banks are a bit more sound and insure the value of your house, but they are few and far between.

In any case, most bank staff know only two things (if that): banking and banking. They know nothing of insurance. It’s a big problem, believe me. In any case, things should be getting better, what with banks appropriating insurance staff, etc. but that’s neither here nor there.

When banks insure your house, like I said, you’re paying the premium, so take note of the following:-

As a homeowner, there’s really only one, comprehensive insurance policy you need. This policy’s called a “Householder / Houseowner” policy. They come in various names depending on the insurance company with which the bank’s tied to. But it doesn’t matter. A houseowner/householder policy is a tariffed policy - all of them are the same, it doesn’t matter which company sells it.

You might have noticed the two distinct terms in the policy. A “houseowner’s” policy covers your building, including your fixtures and fittings. A “householder’s” policy covers your contents. If you buy a policy that covers both your building and contents, such a policy’s usually termed a “householder/houseowner’s” policy. Still with me? Good.

Banks will usually only insure your building, because your building is the basis of the mortgage you have with your bank. So if you can’t convince your bank to include cover for your contents in the policy they arrange for you, get your own householder’s policy.

So make sure it’s a houseowner’s policy or any variation of the same - and not a Fire policy. Some bank staff, because they don’t know, sometimes arrange for a fire policy to cover the house. But you are exposed to more hazards than just fire. Your roofing might get blown off by a windstorm. Your pipes might burst and flood your house. A householder/houseowner policy will cover all of this, but a fire policy will not.

Be careful, ya?

Like I said, banks usually insure the value of your loan with them. They aren’t concerned if your building collapses, they are only interested in whether their loan gets paid back eventually. What is the consequence of all this? Suppose you take a loan of RM 60,000. The bank insures your house for RM 60,000. After ten years, your loan amount stands at RM 20,000. Naturally it is more economical to insure a house for RM 20,000 (premium’s smaller - ya, the premium that you pay.. the stupidity..) and that’s what the bank will insure your house for. But will your house be worth RM 20,000 in ten years?

Naturally not. Make certain you check, ya?

There are more considerations to take into account, of course, but I’ll continue in a later post.