When signing for a new bond on a property purchase buyers should take the trouble to ‘shop around’ for their homeowners’ insurance.
There are some clauses, says Steward, that the average householder is probably not familiar with, but which should be in every contract.
This is the advice from Lanice Steward, MD of Anne Porter Knight Frank who adds that negligence or carelessness in these matters has cost certain homeowners dearly.
She says that often the new homeowner is so delighted to have a bond that he or she simply accepts the insurer suggested by the bank (which, of course, then gets commission payments). However, she says the good news is that this choice of insurer will usually be a highly reputable company – “as banks do not associate with dicey operations”.
“The bad news is that in APKF’s experience these can be anything from 10% to 35% above the more competitive rates available if one really goes out and looks for them,” says Steward.
Steward warns that those who pay cash for their homes sometimes forget that they should take insurance cover on the home - and on all household goods.
This omission, says Steward, can lead to really tragic situations if the home burns down, is struck by lightning, is severely vandalised, flooded or is badly damaged in some other way.
“In addition, every now and again we come across cases where the buyer does insure the home but does not insure himself.”
In this instance, Steward says, should the husband die for example, his wife may well find that although she has a paid-up home, she has far too little income to live on.
She says that if on the other hand the buyer is buying with a bond the banks will almost always insist that he or she does take out life insurance cover. “Again, however, this may be only enough to pay off the bond, not to provide an income.
She says in tough times she cannot stress enough how important it is for clients “to take any steps they can to avoid cutting back on life insurance”.
Steward advises those insuring a home to read the checklist drawn up by the Cape attorneys, Smith Tabata Buchanan Boyes.
There are some clauses here, says Steward, that the average householder is probably not familiar with, but which should be in every contract. “For example, it should be stipulated that the policy will not be invalidated by any act or omission on the part of the homeowner if this occurs without the bank’s knowledge and, secondly, the policy includes SASRIA and public liability cover.”
Certain policies, says Steward, occasionally try to diminish the insurer’s liability where ‘acts of God’ damage the property, e.g. when landslips or subsidence occur. Confirmation that such ‘acts’ are covered should, she says, be spelled out in the policy and not be taken for granted.
Finally, says Steward, the home should be insured for its replacement value, not for its original purchase price, “and if this means regularly increasing the premiums, that has to be accepted”.
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