Author
Bowtie Team
Updated on
2025-06-12
Disclaimer: This article is translated with the assistance of AI.
Fire insurance, or building structure coverage, is essential for property mortgages. But what does it cover? How does it differ from home insurance? What’s the right coverage amount, and what impacts premiums? Bowtie experts break it down for you!
What is Fire Insurance? What Does It Cover?
Fire insurance, or building structure insurance, is a common insurance type related to properties. It can be further divided into fire disaster insurance and comprehensive building insurance , with the main difference being the coverage scope.
The former specifies the coverage scope, so anything outside of it won’t be covered; the latter provides coverage for most things after excluding some exemption clauses. Comprehensive building insurance is generally more expensive due to the broader protection it offers.
Why is it called fire insurance?
It’s because this type of insurance originally focused on covering losses from properties being destroyed by fire. Over time, it expanded to cover losses to residential building structures from non-fire incidents, such as lightning, explosions, flooding, or typhoons.
Building structures typically include the architectural framework, ceilings, floors, walls, and pipes. Fire insurance protects the structure, not the contents inside, so it won’t compensate for losses of household items.
Who Needs Fire Insurance? Management Company, Owners, or Tenants?
| ✔️ Management Company | If the deed specifies that the property management company needs to purchase fire insurance for the building, the management company must fulfill that responsibility and buy fire insurance for the building. |
| ✔️ Owner | If the owner is required by the bank for a mortgage to purchase fire insurance for the property, they have the responsibility to ensure the property is covered. As referenced earlier, if the property management company has already purchased fire insurance for the building, check if it meets the bank’s requirements; otherwise, additional fire insurance will need to be bought. |
| ❌ Tenant | Since fire insurance primarily covers the building structure, and based on insurance insurable interest principles, only the property owner is eligible to purchase it—tenants cannot buy fire insurance for the property they are renting. |
Is Fire Insurance Required for Mortgages?
Generally, when getting a mortgage, banks will require the owner to purchase fire insurance (building structure insurance) because bank mortgage uses the property as collateral. If the property’s value drops, the bank’s loan is at risk. If the borrower defaults on payments, the bank might struggle to sell the property—who would buy a unit with structural damage?
That’s why banks don’t care if you have home insurance , as internal damage won’t drastically affect the property’s value, but they do insist on fire insurance. Banks usually won’t force you to buy it from them, but they’ll require proof of coverage; otherwise, they won’t approve the mortgage.
In most cases, newer large estates, Home Ownership Scheme properties, and public housing have what’s called “master policy” insurance, or collective fire insurance, with premiums included in the management fees. If your property has this master policy, you just need to provide a copy of the policy to the bank as proof. The bank will then decide based on the coverage whether you need extra fire insurance. Some banks even have a list of approved master policies, so you might not need to provide proof at all.
If your property doesn’t have master policy or fire insurance from the management company, or if it doesn’t meet the bank’s requirements, you’ll need to purchase fire insurance yourself.
Do I Still Need to Buy Fire Insurance After Buying a Property or Paying Off the Mortgage?
If you purchased a property without needing a mortgage, or if you’ve already paid off your property loan, you might hesitate about whether you still need fire insurance.
It’s worth noting that, even though your property is free of any mortgage, the risk of structural damage from natural disasters hasn’t changed. If repairs are needed, you could face significant repair costs.
With that in mind, even if your property doesn’t require a mortgage or you’ve already paid it off, you should still consider getting fire insurance for the necessary protection.
Differences Between Fire Insurance, Home Insurance, and Water Insurance
Fire Insurance VS Home Insurance
Generally speaking, the most common confusion is between fire insurance and home insurance , but they’re actually quite different.
The key difference between fire insurance and home insurance is that fire insurance only covers the building structure , while home insurance covers losses to household items, such as money, collectibles, furniture, household appliances, and home renovations due to accidents .
For example, if a typhoon breaks your windows and damages your household items, fire insurance will cover the window repair costs, while home insurance will compensate for the damaged items. In other words, fire insurance doesn’t cover item losses, and home insurance doesn’t cover structural damage—you can think of it as fire insurance protecting the building structure and home insurance safeguarding the contents inside.
| Fire Insurance | Home Insurance | |
| Coverage Scope | Losses to the building structure due to accidents like flooding, fire, or typhoons | Losses to household items due to accidents, and in some cases, coverage for the property owner’s item losses |
| Must Property Owners Get It? | Generally required if taking out a mortgage for the property | Optional |
| Do Tenants Need It? | Tenants can’t get it due to insurable interest principles | Optional |
Water Insurance
As for water insurance , it’s not about compensating for losses from leaks or flooding in your home. Instead, it’s marine insurance , which is used to protect against risks in sea transportation of goods. Water insurance is typically tailored for transportation service providers and equipment operators. It can be purchased for any mode of transport, whether by ship, plane, train, or truck.
So, water insurance has absolutely nothing to do with home insurance.
Differences Between Fire Insurance and Third-Party Liability Insurance
The main coverage of fire insurance is for accidental damage to the structure within your residence, while third-party liability insurance protects against damage to third-party property or bodily injury caused by negligence. Fire insurance generally does not include third-party liability coverage, but some insurance plans offer it as an optional add-on; home insurance typically includes third-party liability insurance.
For example, if your property’s structure is damaged by a fire, fire insurance will cover it. If the fire spreads to a neighbor’s property, causing damage or injury, third-party liability coverage will handle that part of the compensation.
Differences Between Third-Party Risk Insurance Purchased by Owners’ Incorporation and Home Insurance
The Buildings Management Ordinance (Cap. 344 of the Laws of Hong Kong) and the Buildings Management (Third Party Risks Insurance) Regulation (Cap. 344B) mandate that owners’ incorporations must purchase third-party risk insurance to protect owners from massive compensation claims in case of accidents and to provide better public safeguards.
Since the owners’ incorporation is required to buy third-party risk insurance, do owners or tenants still need home insurance or third-party liability coverage? It’s important to note that this insurance mainly covers accidents in common areas of the building, such as falling debris from the exterior walls hitting a pedestrian— that’s where it kicks in. However, if an incident occurs in a private area and affects others, this insurance won’t cover it. So, even if your building has third-party risk insurance, you should still get home insurance or third-party liability coverage for full protection.
Best Fire Insurance Options: Discover the Cheapest Plan!
| Insurance Company A | Insurance Company O | Insurance Company C | Insurance Company G | |
| Sum Insured | HK$6,000,000 | HK$6,000,000 | HK$6,000,000 | HK$6,000,000 |
| Coverage Scope | 🔥Fire
⚡Lightning 💥Explosion Earthquake ✈️Falling aircraft Bursting or overflowing of water pipes or tanks 🌀Storm, typhoon, or flooding Riot/strike Malicious damage Impact from third-party vehicles Landslide |
🔥Fire
💦Flooding ⚡Lightning strike 💥Stove gas explosion |
🔥Fire
⚡Lightning 💥Household gas or boiler explosion |
🔥Fire
⚡Lightning 💥Household boiler or gas fuel explosion 💦Flood 🌀Typhoon/ Storm Landslide Ground subsidence Strike/ Riot Wilful damage 🔥Bushfire Water tank overflow Bursting of pipes Sprinkler system failure |
| Premium | HK$3,780 | HK$1,800 | HK$2,763 | HK$2,400 |
| Application Method | Online application | Online application | Online application | Online application |
💵How Much Fire Insurance Coverage Should You Buy?
There are 3 ways to calculate fire insurance coverage: based on the original mortgage loan amount, the property reconstruction value, or the remaining mortgage balance.
Calculate Based on the Original Mortgage Loan Amount
If you calculate based on the original mortgage loan amount, the method is to use the property’s mortgage loan amount as the fire insurance coverage. For example, if your property’s original price is HK$8 million with a 90% mortgage loan of HK$7.2 million, then the fire insurance coverage would be HK$7.2 million.
Calculate Based on the Property Reconstruction Value
Calculating based on the property reconstruction value means that a valuation firm will estimate the reconstruction value of the property, taking into account factors like location, surrounding environment, and property size to determine the cost of rebuilding a specific area. Since current mortgage loan-to-value ratios are quite high, in most cases, the reconstruction cost will be lower than the original mortgage loan amount.
Keep in mind that if you choose to use the property reconstruction value as the coverage amount, you might need to pay valuation fees and administrative fees when renewing the policy each year, and these costs could vary based on the revalued property amount.
Calculate Based on the Remaining Mortgage Balance
As you continue to repay the mortgage principal, the outstanding loan balance will decrease over time. At that point, you might consider switching from calculating fire insurance coverage based on the original mortgage amount to the remaining balance to save on premiums. However, when changing the calculation method, the bank may charge a processing fee.
How Are Fire Insurance Premiums Calculated?
Calculating fire insurance premiums is straightforward: simply multiply the coverage amount by the premium rate. The coverage amount is determined by the property owner based on the original mortgage loan amount, property reconstruction value, or remaining mortgage balance.
Fire insurance premium rates in the market are generally below 0.15%, typically ranging from about 0.03% to 0.07% of the loan amount. If the policy offers broader coverage, the premium will be higher. Discounts are provided by banks or insurance companies.
For instance, if the mortgage loan amount is HK$7 million, the premium rate is 0.15%, and there’s a 10% discount, the premium would come to HK$9,450.
In summary, the premium calculation formula is:
Reconstruction cost / Mortgage loan amount / Remaining loan amount x Premium rate x Discount amount
⚖️What Factors Affect Fire Insurance Premiums?
Fire insurance premiums can be influenced by several factors, including:
- Area
The larger the area, the higher the premium will be. - Property Type
If the property is a tenement building, standalone house, or village house, the premium might be higher, and you may even need to negotiate directly with the insurance company. - Age of the Building
The older the property, the more expensive the premium. If the building is too old, you might need to contact the insurance company for a quote. - Coverage Scope
The wider the range of coverage provided by the fire insurance, the higher the premium. - Coverage Amount
Fire insurance offers various coverage options, and the premium increases with higher coverage amounts. - Other Factors
Whether the property is for owner-occupation or rental, its location, and if it includes features like a rooftop, garden, or swimming pool.
How to Get Cheaper Fire Insurance Premiums or Discounts?
- Compare quotes and consider options beyond bank fire insurance
When applying for a mortgage, banks typically offer a fire insurance plan alongside it. As mentioned earlier, banks require property owners to purchase fire insurance to approve the mortgage, but you’re not obligated to buy the one from the bank. Bank-provided options are often more expensive, so savvy owners can shop around for quotes that meet the bank’s requirements and save on premiums.
- Check if the building has already purchased collective fire insurance
Plus, some buildings or estates might already have collective fire insurance arranged by the property management company or owners’ corporation. Owners can provide the bank with proof of this coverage and check if it satisfies their requirements. If it does, you could skip the extra cost and pocket those savings on your fire insurance premiums.
- Switch to other methods for calculating the insured amount
Once you’ve paid down some of the mortgage principal, consider recalculating your premium based on the outstanding balance. This often results in a lower insured amount than the original loan, helping you trim those premium costs without cutting corners on coverage.
- Compare premiums and discounts offered by insurance companies
To snag the best deal, it’s all about comparing different plans and picking the one that fits you like a glove. Many insurance companies throw in premium discounts too, so keep an eye out—they could be the cherry on top of your savings strategy.
What Information is Needed for Fire Insurance Quotes?
Generally, when getting a quote for fire insurance, insurance companies will ask for the following details:
- Sum insured
- Property use: Owner-occupied / Owner-rented / Tenant-occupied
- Building type
- Building age (age of the property)
- Gross floor area
How to Choose Fire Insurance Products?
When selecting fire insurance, consider these key factors:
-
- Is the compensation for property rebuilding or cash loss?
Compensation isn’t always in cash— insurers might cover the original items directly. So, the value of fire insurance should be based on the cost to rebuild the property, ensuring you’re covered for reconstruction, not just a payout. - Is the sum insured sufficient?
If rebuilding costs HK$2 million but you only insure for half that amount, you’re shortchanging yourself. For instance, with a HK$1 million policy, the insurer would only cover HK$500,000 in a fire claim— ouch, that’s half the protection you need! - Do you need to pay for valuation fees? Use rebuilding costs for assessment
If you base your assessment on rebuilding costs, you might have to hire a surveyor to estimate the expenses, which means paying “valuation fees.” Some banks make you foot the bill, while others waive it. If you’re on the hook, remember you’ll need to re-evaluate annually, and those fees could add up to over a thousand dollars— something to weigh carefully!
- Is the compensation for property rebuilding or cash loss?
Besides Fire Insurance, What Other Insurance Do You Need?
Fire insurance can protect your property if it’s damaged by accidents, but it doesn’t cover your health. On the other hand, VHIS and Bowtie Term Life can provide medical and life coverage when you need healthcare or in the event of death.
VHIS
VHIS can provide you with basic medical coverage, covering common medical expenses, including surgeons, anesthesia, operating rooms, wards and meals, miscellaneous costs, and more.
The Bowtie VHIS series offers a total of 5 plans, with coverage ranging from HK$420,000 to HK$10,000,000 per year!
👉🏽Check out Compare Different VHIS Plans right now!
Bowtie Term Life
Many homeowners worry that if they pass away during their mortgage period, the large loan repayments could become a financial burden for their family, potentially leading to foreclosure and loss of the home.
To address this, you should consider getting Bowtie Term Life . In the unfortunate event of death, your family can receive compensation to ease the sudden financial strain.
👉🏽Learn more about the Relationship Between Life Insurance and Mortgages !
Common Questions About Fire Insurance
1. If the building has a management company, does it buy fire insurance?
Not necessarily—it depends on whether the deed specifies that the management company must purchase it; otherwise, they might not. Some newer large estates, as well as those built by the Housing Authority or Housing Society, may have a Master Policy (also known as “Master Policy”). This is a collective fire insurance policy bought by the building management to protect the structural safety of common areas. The premium is typically included in the monthly management fees.
2. If the building already has fire insurance, do owners need to buy it themselves?
Even if the building has fire insurance, it’s still recommended that owners get their own, as you might not know the full coverage details, and it often comes with high deductibles. Owners can opt for a more comprehensive policy on their own.
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