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Homeowners’ Insurance Advice

Homeowners’ Insurance Advice

07 May 2020

There has not been a better time in the last decade to buy a home, says Paul Stevens, CEO of Just Property. If you are in a position to do so, remember to factor in house owner’s insurance.

‘Believe it or not, it is possible to buy a home during the lockdown restrictions,’ says Paul Stevens, CEO of Just Property. ‘The Deeds Office is open and interest rates have fallen for the third time this year.’

‘You might not be able to physically view a property, but if you fell in love with a home you visited before lockdown or you have found the right property online during lockdown, we can do everything for you virtually, from facilitating an offer to purchase to seeing the transaction through to transfer.’ 

Remember to factor in all the costs of purchasing a home. We cover this in the “GETTING YOUR BUCKS IN A ROW” section of Your Property Journey, our simple, everything-in-one-place guide to buying property.

The cost of insurance is something first-time home buyers often forget to include in their calculations, says Stevens. ‘Apart from insuring your bond and the contents of your home, you will need house owner’s insurance. This covers you in the event of lightning, fire, storm, hail and water damage to permanent parts of your property (i.e. everything you wouldn’t take with you when you leave one day).’

Here are things you might not know about house owner’s insurance, as it applies to full title property. There are variances for sectional title properties.

  • Geysers

    Standard house owner insurance policies cover a burst geyser and certain maintenance costs, limited to the normal price of an installed electrical geyser. If you plan to go solar, advise your insurer. 
  • Retaining walls

    If your home is built on a slope, check that the retaining walls are included in your policy (they aren’t as a rule), and that they comply with building regulations.
  • Compliance

    Insurers are obliged to obey the law – any non-compliance with building, wiring and other regulations and you won’t get paid out.
  • Load-shedding

    Despite frequent power outages in South Africa, not all insurance policies include power-surge coverage and, if they do, might offer limited cover. 

What your decisions mean

It is critical to ensure that your new home is properly insured; in other words, that the sum insured is sufficient in the event of a major claim. If the entire property is destroyed or made uninhabitable, you will need enough insurance to clear the rubble and rebuild all permanent structures. 

Remember, the valuation you receive from your bank may only cover what you owe on your bond and not the full, actual value of your home including improvements. The decision to increase this is up to you. The safest way to ensure you have sufficient cover is to appoint an evaluator, or ask a builder for an estimation and add a percentage for professional fees and demolition costs.

Underinsurance can have distressing repercussions at times when you are already reeling from a disaster. If the sum that you elect to insure for is insufficient to rebuild from scratch, your insurance will apply the average clause.

What does this mean? Say that you should have been insured for R1-million, but you opted for R750 000 to save money. If your whole house burns down, your insurer will pay a maximum of R750 000. And even smaller claims are impacted. If a fire in your kitchen causes smoke damage to the value of R10 000, ‘application of the average clause’ means that the ratio of R750 000: R1-mill (75%) will apply and you will be paid out R7 500.

Protect yourself

‘It is often a good idea to use an independent insurance broker who has your own interests at heart,’ says Stevens. ‘A broker is required, legally, to make sure you have been properly advised on all requirements for proper coverage, and to guide you through the process.’

Remember, insurance policies are required by law to be easily understandable and to be written in plain English, he adds. ‘Go through the policy wording carefully. Be aware of any exclusions and ask about anything you don’t understand.’

Insurance to cover your bond

When you take out a bond, your bank may request that you take out life insurance. This will ensure that your family won’t be left with the burden of paying off your bond or have to sell the property to cover it, should you pass away.

If you already have life insurance in place to cover, for example, your children’s education and living expenses, think carefully before deciding that you don’t need more cover when you buy a home. If you were to die without having increased your insurance, the life cover will be used to pay off your bond, leaving little for the costs you initially bought it for.

Remember, you don’t have to use the bank’s own product. You can also ask your own insurance advisor to suggest a product that suits you best. Recent events during the Covid-19 pandemic have shown how useful this can be if you find yourself unable to make repayments.

For more information on Just Property please visit www.just.property or call (087) 550 2258.

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