Is your home properly insured?

As widely believed, there is no place like home, but the unfortunate truth is that owning a house nowadays simply means accumulating more expenses.

There is the cost of ongoing maintenance to think about, as well as the insurance premiums that are a legal requirement in South Africa for anyone who has bought a house using a home loan.

But, rather than being viewed as a grudge purchase, an insurance policy should be seen for what it really is, says Tetiwe Jawuna, Head of Standard Bank Insurance Brokers.

“A house is an investment. It is an asset that grows in value as it provides a haven for the family, it is also the base for building wealth and is a legacy to help secure the future of your family,” says Jawuna.

“Because it is all these things, homeowners insurance should be viewed as an investment in the future, rather than an inconvenient cost.”

Jawuna says a house rarely stays exactly the same throughout its life stages. Renovations take place, additions from paving to garden walls and extra rooms are made, and the fitting of stylish kitchens and bathrooms also takes place.

“As these changes occur and the homeowner’s investment increases, so does the value of the property. It makes sense to ensure that this investment is protected, and having a homeowner’s policy does just that,” says Jawuna.

Jawuna says the policy also brings peace of mind through other avenues. These include, but are not limited to, the following:

1. Enabling repairs to be carried out if the house is damaged by a storm or hit by lightning.

2. Cover for outbuildings and even the walls or security fences that have been erected around a property.

3. Enabling window glass shattered by intruders or just by accident to be replaced.

4. Covering the costs of expensive plumbing repairs. The most common of these is the replacement of burst hot water geysers and resultant damages.

5. Cost of replacing damaged pool pumps and gate motors.

6. Land slippage that could cause damage to foundations and walls.

7. Earthquake, fire, hail and flood damage.

“Any repairs of the above nature can become quite costly. Having an uninsured house therefore means potentially having to raise a loan to pay repairs which can be costly,” says Jawuna.

“Failure to repair the house means that its market value reduces drastically. In addition, if the home is subject to a home loan and insurance hasn’t been arranged, the finance provider could insist on this being done at the owner’s expense.”

Jawuna says it is far better to pay a single excess amount on a claim, than to be faced with possible long-term debt.

Turning to homeowner’s insurance policy, Jawuna recommends that homeowners should 

1. Read the policy carefully

A policy must be carefully read and understood. If the purchaser is uncertain about any of the clauses in the policy, it is really worthwhile getting a broker, attorney or someone with contract knowledge to explain a policy.

2. Know what’s covered and what’s not

A list of what is covered is drawn up and checked. Some policies offer more benefits than others, so it pays to check ‘who pays for what’.

3. Insure for full replacement

Making sure the home is insured for the full replacement value - a very important consideration if a house was built many years before being bought. Also, remember that this is not the same as market value.

4. Do the math

The value of the land on which the house stands is excluded from the calculation of the replacement value of the buildings.

5. Work with insurance-approved suppliers

As most insurance companies have their own list of approved contractors, homeowners must make sure that these suppliers are used when repairs have to be undertaken. As these contractors have service level agreements in place with the companies concerned, they can be taken to task by the insurer if work is not up to expectations.

6. Know the difference between homeowner’s and householder’s policy

Homeowners must clearly understand that a homeowner’s policy is different to a householder’s policy. A householder’s policy covers only the contents of a home.

Jawuna says one of the most difficult things to do is to get an accurate value for a home - taking a guess and then applying for insurance cover has the potential for being very costly.

If a person believes a house is worth R2 million, for example, and insists it is insured for that amount, but its true replacement value is only R1.2 million, then the insurance premium paid on the difference of R800 000 is wasted. This is because the insurer will say that the property was over-insured.

“If the property is really worth R2 million and the homeowner insures it for just R1.2 million, the house would then be underinsured. In this case, the owner of the property would be proportionately liable for the extra money that would be required to repair major damage,” says Jawuna.

“Any doubt about the value of the house should be resolved before a claim has to be lodged and there is a dispute. Insurance companies will offer advice and assistance on this vital aspect of ownership. It is in the interest of both parties that a house is properly appraised and valued.”

Article courtesy of Property24