Advice and Opinion

Home insurance should be seen for what it is, says Standard Bank

Estate Agency generic

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

Ms Jawuna also points out that a house rarely stays exactly the same throughout its lifestage. 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. Having a homeowner’s policy does just that.”

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

· Enabling repairs to be carried out if the house is damaged by a storm or hit by lightning.
· Cover for outbuildings and even the walls or security fences that have been erected around a property.
· Enabling window glass shattered by intruders or just by accident to be replaced.
· Covering the costs of expensive plumbing repairs. The most common of these is the replacement of burst hot water geysers and resultant damages.
· Cost of replacing damaged pool pumps and gate motors.
· Land slippage that could cause damage to foundations and walls.
· 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. Failure to repair the house means that it’s 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”.

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

Turning to homeowner’s insurance policy, Ms Jawuna recommends that:

· A policy is 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.
· 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.’
· 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.
· That the value of the land on which the house stands is excluded from the calculation of the replacement value of the buildings.
· As most insurance companies have their own list of approved contractors, 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.
· That it is clearly understood that a homeowner’s policy is different to a householder’s policy. A householder’s policy covers only the contents of a home.

“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 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 (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 under insured. In this case, the owner of the property would be proportionately liable for the extra money that would be required to repair major damage”.

“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,” concludes Ms Jawuna.