Consumers tend to look for a home insurance plan that offers maximum protection for their house and its contents, but they often overlook the excess amounts and limits on compensation, as well as the exclusions that come with these policies.
The lack of understanding among consumers often led to disputes and complaints about home insurance, which the Consumer Council has received a total of 26 complaints in 2010 and 2011, and 8 cases have been lodged in the first six months this year.
Most of these are about failed claims, price disputes and sales practices of the insurers.
To help consumers choose a home insurance plan that best suits their needs, the Consumer Council has looked into 24 home insurance plans for private apartments of 1,500 square feet and under, and examined what protection is on offer and what not.
The study revealed that the policies do more than just provide reimbursement for damage to the house and its contents due to natural disasters like flood, landslide or land subsidence. They also cover the home against burglary as well as during home renovation.
Under the plans, consumers pay a premium according to individual plans usually determined on the basis of the gross floor area of the apartment covered. For example, home insurance for an apartment with a size of 500 square feet or below costs HK$520 to HK$1,131 a year.
The maximum cover of these plans for home contents ranges from HK$100,000 to HK$3,000,000 per incident or per year, and from HK$30,000 to HK$300,000 per item.
Seven of the plans surveyed will step up insurance coverage by 10% to 50% during the months from July to September, peak time for storm and heavy rain, as well as during festival holidays like Christmas and Chinese Lunar New Year.
Most of the plans also cover the damage during interior decoration, with a maximum cover of HK$60,000 to HK$1,200,000 per event. But most of these are confined to projects with a renovation period not exceeding 2 months.
The 24 policies offer legal liability protection from the lowest of HK$3,000,000 to HK$12,000,000 against any legal liability to a third party due to negligence. Some extended the protection to common areas of the building and cover costs associated with litigation in regard to the legal liability.
But an evaluation or assessment will be required before the policy was issued if the age of the building is over 30 years, or the property is a village or stand-alone house, or being located at low-lying or flood-prone areas.
No matter how comprehensive an insurance plan, consumers are reminded that the policies often carry caps on the maximum reimbursement. As such, it is important to ensure the sum insured is adequate or else they will have to absorb part of the loss if the claimed amount exceeded that of the insurance cover.
Moreover, the protection for personal possessions all carry "excess" amounts, or costs not covered by the insurers. An excess of HK$200 to HK$1,000 per claim will be charged for loss and damage to home contents, and for natural disasters like flood, landslide or ground subsidence, the amounts of excess may be much higher.
Consumers' attention is called to the difference between "new for old" basis and "market value compensation" when filing a claim.
The "new for old" replacement cost of a covered item is what it takes to replace the item of a similar type or function in its current price, instead of the market value of the item's latest model. Market value compensation takes into consideration the item's market value after depreciation.
To avoid disputes, consumers should take note of some standard exclusions under which claims are denied: illegal structure, damage that existed before the policy came into effect, when the home is left unoccupied for 30 to 60 days, as well as wear and tear, loss and damage caused by war, radiation, terrorism or government acts.
In choosing a home insurance plan, consumers are reminded to compare the price, the terms and exclusions of different policies.
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- 2012.07.16