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  • 1 Post By jlm88

Fire Insurance - % of Property Value

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  1. #1

    Join Date
    Aug 2006

    The agent / insurance company decided on the 'number' when I got fire insurance. I accepted their judgment.

  2. #2

    Join Date
    Sep 2016

    The building management company gets fire insurance for the entire building which might cover yours too, so I was told. Hence, I only got household insurance for my own unit. U can check with your insurance company. They decide coverage according to property size.

    fruitsalad likes this.

  3. #3

    Join Date
    May 2014
    Hong Kong

    As an insurance broker, it depends on the wording of the insurance policy. Normally the Fire insurance policy covers Fire and other perils at the location, but if the building burns down the wording usually specifies the "rebuilding cost" is the maximum the insurer would pay. This is not the amount you may have paid for the building, including any mortgage, but the cost to rebuild the building, or your "part" of the building, to the standard it was before the fire.

    The bank will try to make you use the outstanding mortgage amount as they want that covered too. You need to tell the bank the mortgage is not covered by the policy and the maximum the insurer will pay is the rebuilding cost, as per the policy wording.

    However, here are Home policies that cover your Contents and can also cover the Building for the rebuilding cost or the outstanding mortgage amount, whichever is the higher, and these policies are accepted by the banks providing the mortgage.

    If it is a Fire policy, it does not cover the outstanding mortgage amount.
    If it is a House policy, check if the outstanding mortgage amount is covered or not. If not, advise the bank the maximum the insurer will pay is the rebuilding cost, and the policy cannot be issued for a higher amount, as it will not be reimbursed.

    If the House policy pays off the mortgage, fine. If not, you will be required to continue paying the mortgage off.

    The insurer only pays to replace the lost or damaged item. Once the building is rebuilt, it would be brand new and could then be sold at a higher price than you may have bought it at.

    The rebuilding cost varies per building. You could pay to have a survey done by property company such as Centaline or Midland, or calculate the cost yourself. The following website provides quarterly cost analysis of rebuilding costs.

    The calculation should be based on the gross floor area of your apartment, including a share of the public areas, your car park space, the roof etc

    Last edited by *Andrew*; 10-05-2022 at 04:54 PM.