【2023 Fire Insurance Guide】Essential for a Mortgage? How to Compare and Score the Best Deal?

So, you’re in the process of buying a home, which usually means taking out a mortgage. But here’s the thing: your lender is going to ask you to secure your home with fire insurance (aka building structure insurance). It may sound like a routine step but hold up, there’s a twist: fire insurance premiums can vary by a staggering 90%! If you’re all about maximizing savings, finding the best fire insurance deal becomes crucial. That means brushing up on how to compare premiums, understanding the coverage each plan provides, and knowing how to tell apart fire insurance from home insurance. But hey, no need to stress! Our 2023 Fire Insurance Guide is here to help. Get ready to become a savvy homeowner who’s got it all figured out!

Quick Guide:

• Fire Insurance: What’s the Deal?
• Fire Insurance vs Home Insurance: Spotting the Difference
• Is Fire Insurance a Necessity for Your Mortgage? Can You Skip It If You Don’t Have a Mortgage?
• Do Only Homeowners Need Fire Insurance?
• How Can I Secure the Best Deal on Fire Insurance? How is the Sum Insured Calculated?
• Key Factors to Keep in Mind When Comparing Fire Insurance Premiums
• Getting on Board: What You Need for Fire Insurance Enrollment
• Frequently Asked Questions About Fire Insurance

Fire Insurance: What’s the Deal?

Fire insurance is often mistaken as only covering damages from fire accidents. While there’s some truth to that, there’s a specific variant of fire insurance that provides protection for properties, like industrial buildings, solely against fire accidents. However, when we talk about “fire insurance,” we’re usually referring to “building structure insurance” (the very topic we’re unpacking here!). This type of insurance goes beyond just fire accidents and covers a range of natural disasters, from lightning strikes to typhoons. It ensures that damages to crucial structural components of a property – floors, ceilings, walls, etc., are covered.

Fire Insurance vs Home Insurance: Spotting the Difference

Fire insurance and home insurance are two different animals, with their primary difference being what they cover. Fire insurance is all about guarding the building structure of your home, while home insurance is your shield for the contents and valuables inside your home. So, your furniture, appliances, and all your beloved possessions are protected by home insurance in case of a mishap, even during renovations.

Let’s paint a picture to help explain: A typhoon rolls in and shatters your windows, resulting in rainwater leaking into your house and ruining your carpet. In this scenario, your fire insurance would cover the window repairs (if applicable), while your home insurance would step in to replace your soggy carpet.

So, who needs which? If you’re a homeowner, fire insurance usually falls in your court as it focuses on the building structure. Renters, you can relax a bit – your landlord should have sorted out the fire insurance bit. However, both homeowners and renters can opt for and enjoy the benefits of home insurance, as it covers the contents inside the home. Just remember, you can only insure the property you’re currently living in for home insurance.

Is Fire Insurance a Necessity for Your Mortgage? Can You Skip It If You Don’t Have a Mortgage?

If you’re securing a mortgage, fire insurance is non-negotiable. Here’s why: your lender is using your property as collateral for the loan, and they certainly don’t want to face hefty losses if your property suffers structural damage in an accident. That’s where fire insurance comes in, safeguarding your lender’s investment. So, getting fire insurance becomes a mandatory checkbox for the lender to approve your mortgage.

During the entire mortgage period, your lender will insist that you hold fire insurance without any breaks. However, once you’ve paid off your mortgage, it’s your call whether to continue with fire insurance. Considering that structural repairs can burn a hole in your pocket, fire insurance can offer some peace of mind for an annual fee that’s typically just a few thousand Hong Kong dollars. So, even post-mortgage, fire insurance can still be a valuable safety net.

Do Only Homeowners Need Fire Insurance?

As we’ve touched on, renters don’t need to worry about getting fire insurance themselves – that’s usually the homeowner’s job. But here’s an interesting point: even as a homeowner, there may be cases where you don’t have to personally insure your property. Let’s dive in.

In some private housing estates, the Deed of Mutual Covenant (DMC) mandates that the property management company purchases a fire master policy that covers the entire estate. The cost of this policy gets divided among all homeowners as part of their management fees. So, if your estate already has a fire master policy, you can check with your lender to see if it meets their fire insurance requirement for your mortgage. Your lender might even have a list of approved estates with a fire master policy. If that’s the case, you can skip buying an additional policy for your home.

Public housing estates and HOS courts are covered by a fire master policy managed by the Housing Authority. So, if you’re a homeowner in these types of housing, you generally don’t need to purchase your own fire insurance.

How Can I Secure the Best Deal on Fire Insurance? How is the Sum Insured Calculated?

Now that we’ve got fire insurance and its coverage all squared away, let’s dive into the nitty-gritty of snagging the best deal.

When it comes to calculating the sum insured, there’s a trio of methods you can consider: the “original mortgage value”, “current mortgage value”, and the “property reinstatement cost”.

Once you’ve pinned down the calculation method that fits you like a glove, it’s time to peek at the premium rates offered by different fire insurance providers. Most banks partner with an underwriter for fire insurance and offer sweet deals like 6 months free or discounts for the first year. But here’s a heads up: you’re not obliged to buy fire coverage from your lender or their partner. Those promotional offers may not actually be the best bang for your buck. So, why not go digital, shop around, and compare premium rates from different plans? Consider OneDegree Fire Insurance, who offer policies at just 0.038%, with the best price guaranteed. It’s a deal with the most value in the market.

Here’s how to calculate your annual fire insurance premium: Sum Insured x premium rate x applicable discount rate. Let’s do some number crunching for a clearer picture. Imagine you have a sum insured of HK$3 million, and your plan doesn’t offer any discounts. With OneDegree, you’d only fork out HK$1,140 for one year at an incredibly low premium rate of 0.038%. If you went with the highest rate in the market, a staggering 0.2%, your annual premium would zoom up to HK$6,000 – that’s an eye-popping HK$4,860 more! Trust me, that difference really stacks up. Over a 15-year mortgage, that seemingly small difference can actually save you nearly $150,000!

Key Factors to Keep in Mind When Comparing Fire Insurance Premiums

Now that you’re in the know about the significant differences in premium rates among insurers, it’s key to remember that the premium rate isn’t the only factor determining your fire insurance premium. There are other factors to chew over as well, such as:

• Building Type: Premiums for certain building types like village houses, tenement buildings, and detached houses tend to be steeper.
• Property Area: While the sum insured calculation might not directly take into account the area of your home, if the sum insured isn’t enough to cover the entire property, your lender may ask you to increase the sum insured. It’s smart to check with your lender beforehand.
• Building Age: Since fire insurance primarily zeroes in on building structures, premiums for older buildings usually come with a higher tag. Some insurers even set limits on the insurable age of buildings.
• Minimum Sum Insured and Premium: Most insurance providers have a “minimum sum insured” and “minimum premium” requirement. If your sum insured dips below their minimum threshold, you might be charged a higher premium rate to meet their requirements.

OneDegree Fire Insurance is known for embracing all types of buildings, regardless of their age. We provide coverage for residential properties across the city at a flat rate, making it a breeze for homeowners to secure fire insurance.

Getting on Board: What You Need for Fire Insurance Enrollment

Signing up for fire insurance has been made a breeze by most insurance providers, offering the convenience of online enrollment. As you go through this process, you’ll need to have some specific details at hand, including the sum insured, designated policyholder, address of your mortgaged property, and the name of your mortgage lender (bank name), among others. If you’re looking to switch fire insurers, don’t forget to give your current provider a heads up to terminate your existing policy.

Take, for instance, OneDegree Fire Insurance. We offer a special 180-day extension period that adds an extra layer of convenience. This means you have the flexibility to pick your own policy start date within this extended timeframe. So, if you stumble upon a smashing discount, you can grab the deal ahead of time and sync your new plan with the expiration date of your current policy. Smart, right?

Frequently Asked Questions About Fire Insurance

Are all banks accepting OneDegree Fire Insurance for mortgages?

Uncertainty often bubbles up when figuring out which fire insurance plans mortgage lenders will accept. The good news is, OneDegree Fire Insurance is currently accepted by the following banks for homeowners seeking a mortgage:

How can I renew my OneDegree Fire Insurance policy?

We’ll shoot you an email or SMS notification about renewing your policy three months before your policy expiration date. To keep your coverage going strong, all you need to do is complete your renewal by visiting the link provided in your renewal notice. If you’re looking to lower the sum insured for your renewal plan, we recommend confirming with your lender first. Once you’ve wrapped up the renewal, simply drop us an email at care@onedegree.hk to let us know about the change.

With OneDegree Fire Insurance, you’ll enjoy a competitive premium rate of just 0.038% for your policy. We also back you up with our Best Price Guarantee. If you stumble upon a product in the market offering the same coverage and general terms at a lower price, we’ll happily refund the difference.

Switching to OneDegree is as simple as do-re-mi:

1. Hash out the enrollment details with your mortgage lender, including the sum insured, insured property address, policy start date, and designated policyholder. If you currently have a fire policy, make sure to apply for termination with your current insurer and confirm the policy termination date before moving forward.
2. Once you’ve wrapped up your online enrollment, we’ll get the ball rolling. Within just seven working days, we’ll submit your new policy to your lender. Once they give it the green light, voila, the switching process is done and dusted!

Ready to get started? Click here now to snag an instant quote for OneDegree Fire Insurance!