Despite the occasional horror story, only around 15 per cent of Hong Kong residents buy household insurance, according to a survey by HSBC.

'That is certainly low in comparison to other developed countries,' said Ann Pearce, head of insurance products in HSBC's personal financial services arm. She believes this is often due to misconceptions about what can and cannot be covered.

Water damage - which includes most of the damage caused by typhoons - accounts for more than half the claims made at the bank each year, according to Ms Pearce.

In 1999, a strikingly stormy year, a large number of claims was filled in. 'When [typhoons York and Sam] came in we had over 700 claims paid ... for home contents and building insurance. Water damage would have been the majority,' Ms Pearce said.

In September that year, Typhoon York saw the signal raised to the highest level - 10. In the aftermath, insurance firms paid out $290.91 million for all types of claims. Only a month earlier, Typhoon Sam had struck Hong Kong, leading to payouts of HK$99.74 million. Many properties lost windows or had their walls damaged and items inside destroyed.

Inclement weather is not the only thing that home insurance protects against. Burglary is the second most common claim for HSBC, accounting for around a quarter of the total. Government figures released last week, showing dramatic increases in various types of theft in the first half of the year, add to the case for some protection.

Despite these risks, insurance rarely seems to feature highly on individual priority lists.

'Hong Kong [is] a very investment-focused town. Insurance of any description - be it personal, corporate or domestic - is often something that is largely overlooked,' said Towry Law associate director Chris Beale. 'Domestically it is a market which is grossly untapped. In the UK ... it is just taken as read that everyone has home insurance or contents insurance.'

For as little as a couple of hundred dollars a month, policyholders can protect their home contents, with additional cover available for damage to personal goods and documents when moving house or travelling, extra protection over holiday periods and even loss of frozen foods due to electricity failure. Those with valuable art collections or other items of higher value will pay considerably more.

'The main reason [for the low take-up] is probably that people are still not that familiar with what [home insurance] does,' Ms Pearce said. 'People often think it's for the big losses, but it's also for small things.' Home insurance can often cover the loss of a wallet or purse, including the costs of replacing credit and identity cards.

Many tenants also mistakenly believe landlords' insurance will cover their possessions. Building insurance covers the structure of the building but not inhabitants' contents. 'Your personal possessions are your responsibility,' said Ms Pearce.

Home insurance policies are generally structured in two ways. One is based solely on the size of your home. With the other, buyers can take out insurance cover at a level chosen in relation to the value of their possessions. The first - based on flat size - can give people more insurance cover than necessary, which leads to higher premiums. 'There may be four or five different categories [based on apartment size]. And they would give you more cover than you probably need,' said Andy Brooks, director of insurance broker MG Geraghty. 'We don't actually sell much of that.'

Mr Brooks finds policies that allow a policyholders to select how much cover they need for goods lost outside the home to be the most popular. 'A lot of our clients want to insure things on a worldwide basis away from home. The type of products we sell have the flexibility to do that,' said Mr Brooks. 'Under the square-foot policies ... you tend to find there are lots of limitations.'

Insurance experts say people should first assess the value of all their belongings to determine the level of coverage needed - in other words, the maximum amount your insurance firm would be liable to pay. 'Think about the cost involved in replacing everything you have, just to make sure you feel comfortable with the sort of limits [on your policy],' said Ms Pearce.

Policyholders should find out at the outset if a policy covers goods on a worldwide basis, or outside the home, and up to what value. They should also review the policy from time to time to check coverage is adequate. 'People do tend to amass things and you can suddenly think 'Maybe I need a little bit more cover',' said Ms Pearce.

People should also check whether they have 'new for old' cover. If, for example, your television was damaged or stolen, you could be reimbursed the value of a new set, not the old, used one.

Home insurance buyers should also check the building insurance of the block or house they live in, to ensure there are no gaps in coverage between the two policies.

Another area for careful examination is how much policyholders are expected to pay for damages themselves before the insurance firm contributes to a claim, known as the excess. The higher the excess, the lower the coverage.

In general, a careful examination of the restrictions and limitations of any policy is required.

The Insurance Claims Complaints Bureau - which arbitrates disputes between insurers and policyholders - cites a case it adjudicated where damage caused by water overflowing from a cistern was not covered by the insurance firm.

The policyholder was said to have been out of the flat for more than six weeks and had not informed the insurance firm, contravening the policy. The clause in the policy was to protect the insurer against higher claims. If a home is uninhabited for a long period, any damage that occurs is likely to be worse than if someone lived there since it would take longer for any problem to be spotted and rectified.

The Federation's Complaints Panel upheld the insurer's decision not to pay out the HK$52,000 claim, leaving the policyholder to pick up the tab.