Filipinos are still on a home-buying spree, even as the US housing sector still reels from the effects of the subprime mortgage mess. Thanks to money flowing in from Filipinos working overseas, the real estate sector in the Philippines seems to be set for another big year in 2008.
It’s good money flowing in for good reasons. At least, Filipinos are putting their money in something that will last and even appreciate in value, as opposed to appliances, cars and latest mobile phone models. Hello iPod? (Read this article on what families of OFWs do with money wired to them regularly.)
But although buying a home can be pretty straightforward (ok a bit challenging too), buying home insurance can feel like going through a maze. This article from our personal finance section says there are three MUST-ASK questions when buying home insurance (excerpt below):
1. What do I need to cover?
Basic coverage includes fire and lightning plus third party liability. There are also add-ons like earthquake, floods, typhoons, riots, strikes etc., says Redentor Ramos, assistant manager at Paramount Insurance. I learned in another interview that these add-ons are cheap, and it makes good sense to consider them, but to choose carefully too. “If you don’t think your house will get hit by a crashing plane or it’s highly unlikely rioters will cause damage to your house, then exclude coverage for these. Some insurers offer accident, hospitalization, and personal liability insurance. If you already have those from separate policies, you don’t have to include them,” says the article.
2. How much is the value?
Make sure you exclude the value of your land, since you only need to insure your house and the property inside! Including land is silly (land does not get burned or damaged by flood – unless you’re dealing with lahar, of course) and bloats the premium. Another tip is to reassess the value when you renew your policy so you don’t get under- or over-insured.
3. How much will I receive if I file a claim?
Make sure the policy states that your insurer will pay the replacement value and not the actual cash value which is often less than the amount it would take to replace damaged property.
Generali Pilipinas has come out with a Home Replacement Value simulator as part of its corporate social responsibility program to help Filipinos compute the replacement value of their houses. Sharon B. Maranan, senior executive vice-president and chief operating officer, said during the firm’s yearend media briefing that miscalculations in the replacement value is the most common error made by Filipinos who buy home insurance, based on the study they made.
Try out the calculator through this website: I would have liked to see less jargon, but the simplicity of this calculator made up for the jargon :).
There was no key to a new house under my tree this year. Perhaps next year. But by then, I know a little bit about getting the right home insurance for my dream house! May the universe also respond to all your desires in 2008.
August 11th, 2008 at 3:48 pm
Does insurance for home business differs from the said coverage?
January 15th, 2008 at 5:41 pm
Thanks salve. I bought the properties for less than ‘replacement cost’ and I think I can buy the same for less. Anyway I’ll ask my insurance agent maybe I’m under insured. Bargain hunters always think everything is cheap.
January 14th, 2008 at 11:36 pm
if the house is still under mortgage when destroyed by fire, who gets to claim insurance, the owner or the bank first?
January 14th, 2008 at 4:55 pm
hi pinoy investor, Generali is saying that replacement value and market value are different, and that replacement value is better. Here is their explanation from their website:
“Market value” also known as actual cash value, is the cost to replace it with new property of similar kind and quality, less depreciation.
“Replacement cost” is the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose.
So What’s the Difference?
The difference between replacement cost and actual cash value is a deduction for depreciation.
Which Is Better?
The amount of insurance you need to properly protect your home is best represented by replacement cost because it compensates you for the actual cost of replacing your home in present value once the cost is incurred.
January 14th, 2008 at 4:08 pm
hi salve, is Generali’s replacement value the cost of new construction? Replacement value should be cost of new construction less depreciation. This should approximate market value. Maybe Generali assumes the house is new. My insurance is based on my estimate of market value.