Mortgage Fire Insurance: Key Tips

Q1｜What is 'Building Structure Insurance'? How is it different from 'Home Insurance'?

• Building Structure Insurance (Fire Insurance): Covers the building structure and fixed installations (walls, floors, doors and windows, fixed pipes, built-in cabinets, fixed light fixtures, etc.); the sum insured is determined based on the reinstatement/replacement cost, not the market value.
• Home Insurance (Home/Contents): Covers movable property inside the home and personal/third-party liability (furniture and appliances, personal items, third-party liability, etc.).
• Both functions are complementary and cannot replace each other; banks require fire insurance, focusing on the recoverability of collateral and risk management.

Q2｜Why do banks require purchasing fire insurance?

• Purpose: The property serves as collateral, and in the event of incidents such as fire/explosion/storm flooding, it can be restored, protecting the bank's mortgage interests.
• Common minimum requirements (subject to each bank's terms):
  • Coverage: Major disasters (fire, lightning, explosion, storm, flood, etc.);
  • Sum insured: Determined based on replacement cost to avoid underinsurance;
  • Beneficiary clause: The policy must name the mortgage bank as the beneficiary/mortgagee, usually specified through a policy endorsement (rider);
  • Effective period: Must cover from the completion date; if construction work is needed before completion, fire insurance should take effect earlier;
  • Document submission: Submit the policy/certificate/policy endorsement (rider) etc., to the bank as a basis for loan approval.

Q3｜When the estate already has a 'master policy', do I still need to purchase another one? What documents are required?

• Nature of the master policy: It is a structural insurance policy taken out by the Owners' Corporation / Management Company in the name of the entire building (premiums are often included in management fees).
• Common bank practices: In principle, acknowledging the master policy, but documentary proof is required—the buyer should obtain a master policy summary from the management office, specifying the address, coverage period, sum insured, insurer, and claims contact; and provide, as per the bank's requirements, an endorsement (rider) to the policy naming the bank as beneficiary / mortgagee or equivalent written confirmation.
• Remedial paths for insufficient master policy coverage:
  • Apply to the insurance company for a supplemental endorsement / additional clause
  • Purchase a separate fire insurance policy for the individual unit
  • Have the bank arrange insurance on your behalf (costs borne by the borrower)
• Practical advice: Do not assume that "management fees include insurance = compliant". Immediately after signing the contract, obtain the summary from the management office and verify the endorsement format with the bank; if it cannot be obtained within the deadline, promptly switch to an individual policy to avoid affecting loan disbursement.

Q4｜When is the most appropriate time to arrange and submit?

• Immediately after signing the provisional agreement / formal agreement: Confirm if there is a master policy; request the master policy summary from the management office and verify if it is possible to process a policy endorsement (endorsement) naming the bank.
• 10–14 days before the completion date:
  • If the master policy is sufficient → Submit the master policy summary + policy endorsement (endorsement) to the bank;
  • If the master policy is insufficient / documents cannot be provided on time → Immediately arrange for an individual fire insurance policy, with the effective date set to the completion date at 00:00, and name the bank as the beneficiary / mortgagee.
• Before completion for entry / construction: Fire insurance needs to be effective in advance; construction risks are generally not covered under fire insurance, and you should separately purchase Contractors' All Risks (CAR) + third-party liability.
• Vacancy period: Many policies have restrictions / exclusions for long-term vacancies; you should notify the insurance company in writing and add an endorsement.

Q5｜How to Compare and Choose Fire Insurance?

• Sum Insured Basis: Use replacement cost; consult a surveyor for special properties.
• Coverage and Exclusions: Pay special attention to flooding, pipe leakage, glass, riots/civil unrest, external wall repairs; unauthorized structures/alterations are mostly excluded or require individual assessment.
• Deductible and Claims Process: Deductible affects small claims; understand the proof required for claims, inspection, and repair requirements.
• Bank Interest Clause: Confirm that the policy has named the bank or a corresponding policy endorsement (endorsement slip) has been issued to avoid last-minute document submission before loan disbursement.
• Scenario Enhancements: During renovation → CAR (Contractors' All Risks) + third-party liability; long-term vacancy → vacancy endorsement; smart home/public liability → pair with home insurance as needed.