I recently applied for a mortgage. As part of the conditions of the loan, I have to buy fire insurance (Get extra insurance for peace of mind; May 22).

As my property is a condominium, the management corporation is required to buy fire insurance, so I asked the mortgage specialist whether the policy I had to buy was redundant and a waste of money.

He replied that the policy was to protect the bank’s interest. The insurer’s website indicated that it was a generic fire insurance, and the required sum assured was a third of the loan.

I agree that banks have a legitimate interest in ensuring sufficient coverage. But when we buy a car, we do not have to buy separate insurance to protect the bank, as the Government already makes car insurance compulsory.

It should be the same for a condo. The law requires the management corporation to buy fire-and-peril insurance for the building.

In the United Kingdom, where I have a mortgage on a condo, the lender, which also operates in Singapore, waived the need for fire insurance because the building management had already bought it for the building.

The Monetary Authority of Singapore and the Building and Construction Authority, the agency responsible for the Building Maintenance and Strata Management Act, should require banks to waive such policies for condo owners who take out a mortgage with them.

The authorities should determine a basic level of insurance for management corporations to buy so that it protects the interests of both residents and banks, such as cover for reinstating or rebuilding the condo in the event of fire or other risks.

If specific risks are not covered by the management corporation’s policy, then the bank should work with the insurer to design a product for its needs, such as loss of rental income of condo investors.