Banking Secrets Revealed, Why Pay More? Part III

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Banking Secrets Revealed, Why Pay More? Part III. 

What is Indemnity?

Recompense for loss, damage, or injuries; restitution or reimbursement.

An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. The right to indemnity and the duty to indemnify ordinarily stem from a contractual agreement, which generally protects against liability, loss, or damage. 

In a very simple general term, the insurers pay only the reinstatement or replaced the damaged in cash.

What is reinstatement?

Reinstatement means the insurer will replicate another building the same as before prior it has burnt or tore down. Nowadays, It is very tiresome to reconstruct from the insurer point of view. It is time-consuming.

The most prefer alternative choice for insurers is to indemnify in cash. Let us say that to reconstruction you damaged new house need only RM200,000.00. In the earlier, you take 90% margin loan of RM700,000. Thus the bank will require you to insured your new house for RM630,000.00. It the rate of premium is Rm0.17 per hundred. The total premium is RM1,071.00 (RM630,000 x 0.17)  Thus , your pay extra premium (RM630,000-200000 x 0.17) = RM731.00 for the whole tenure of your housing loan. Isn’t it a wastage?

Interest Protect?

Who interest is the bank protected?. It is obviously, the bank, Not yours.

Since you have mortgaged your house to secure a 90% loan margin on your new house.  Let us examine further on the small fine printed on the insured name in the policy jacket:  Mr. So & Mrs. So as owner AND X BANK AS CHARGEE .F.T.R.R. & I.

Suppose after serving your housing loan for 10 years, there is still another RM300,000.00 outstanding including the principal and interest. Misfortune strikes you on 10 years house, the house is completely burnt to the ground. The insurers will pay the bank first, any balance will go you.

Image the pathetic situation you are caught in the mess. No house to stay, yet you are still serving the balance Rm100,000.00 house loan.

Banking Secrets Revealed, Why Pay More? Part III

To recap

  1. Pay extra for the RM731.00 as premium.
  2. No house to stay, but still serving your house loan promptly and diligently without any delay to avoid penalty on late interest.

If there is a genuine fire razed your building to the ground, the insurers don’t you a single cent, yet you have to pay the housing loan the promptly without unduly delay. Coming soon in my next post.

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Banking Secrets Revealed, Why Pay More? Part III 1