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Insurance gives you peace of mind. However, when budgets are tight a good place to start saving is to relook at your insurance premiums and make sure you get the right cover, at the right price.
As a homeowner with a bond, you are legally bound by the bank to have building insurance in place to protect their investment. It also safeguards you against the risk of having a to pay a bond and being homeless in the event of a disaster.
READ: Buying a Home in 2021? Everything Your Insurance Company Thinks You Know, But You Probably Don’t
What does building insurance cover?
Building insurance (different from home content insurance) is essential to protect you against loss or damage, in the case of a fire, earthquake, severe weather or other disasters. A total loss is when it will cost more to repair or rebuild a damaged property than what its insured value or the replacement value of the property is. While you may be able to afford a new geyser or a damaged floor, if a fire destroys your entire home and it has to be rebuilt, it's an expense very few could afford without insurance.
A good building insurance policy will provide comprehensive cover for your private residence as defined in your policy document, advises Santam's underwriting team.
"It should include items such as your boundary wall, paving, garage and gate (and the motors that power them), your swimming pool and borehole (and their pumps), any outbuildings such as a garden shed and, of course, the structure of the house and all fixtures and fittings."
Do you have sufficient cover?
According to Santam, industry data shows "one out of three homes in South Africa is underinsured by as much as 30% ".
"If you are underinsured, it means that the sum insured is less than the cost of rebuilding or replacing your buildings and structures. So, for example, if your home is insured for R500 000 but the cost of rebuilding it is R625 000, you are underinsured by 20%. That means that you will have to make up the remaining R125 000 yourself."
Try this handy building calculator tool to help you make an inventory of all the structures on your property. Or have a professional risk assessment done - click here for more info
Effective ways to save when taking out insurance:
- Do a policy comparison and source it independently.
- Insure your home contents, building and car on one policy – it gives you leverage to negotiate your premiums.
- Don’t over insure your house. Check your policy and ask your broker to exclude cover you don't really need.
- Avoid any double insurance e.g. insurance with the bank where your bond is as well as your insurance company .
- Check what comprehensive covers include and if you actually need this.
- Your claims history can also affect your premiums, so ensure you limit your risks and keep a good credit record.
What do insurers look at during an evaluation?
It boils down to the replacement or rebuilding cost of your property or what insurers refer to as the value at risk.
"Keeping up to date with your home’s replacement value is vital. Your cover should take into consideration any increase in building costs over the years," advises Santam underwriters Marius Neethling and Marius Steyn.
"Market value heavily depends on location versus the rebuilding/replacement cost that is more dependent on the type of material used, transport of the building material to the building site and the labour cost in that specific area where the building is situated. The rebuilding cost of a bungalow in Camps Bay will depend on the physical type of building material of which it is constructed, the cost of getting the building material on site and the professional cost (e.g. Engineer or Architect) as well as the labour cost of erecting that building by a building contractor.
These costs to rebuild may not be excessive, but its prime location/position makes it super expensive in respect of its market value. The opposite can also be true, e.g. a home in a rural area may have an excessive rebuilding cost, but the building's market value may be less due to its location that is situated in a region or area which is less saleable in the property market. Replacement value depends on what is being replaced, for example: A Victorian home with original features will cost a lot more to replace than a home in a new development. The insured amount should represent the current replacement value of a similar new property," says Neethling.
"A few simple maintenance checks, such as maintaining the roof, guttering and water proofing, taking care of damp immediately, regularly checking electrical wiring, storm water drainage and servicing your fire extinguishers regularly, can reduce your risk, " advises Steyn.
"Ultimately premiums are not the only defining factor when it comes to an insurance policy.
"While some insurers might have a cheaper premium, you have to consider limitations in cover. Consumers should be aware of terms and conditions that often exclude certain events that lead to a damage or loss and excessive excesses payable in the event of a claim."
'Cost-effective package policy'
"Insuring your home contents, cars and buildings on one policy is one of the best ways to save on your monthly premium. Switching is quick and easy, and you’ll get insurance good and proper that looks for reasons to pay you rather than not. Santam has been offering short term insurance for 103 years and therefore the experience and technical know-how to help you manage your risk and premium."
Click here to get a professional risk assessment done.
Key things to note when switching insurers:
According to the underwriting team, it's a good idea to shop around when switching insurance cover from your bank to an insurance company.
"Get various quotes and find an insurance option that works for your needs and your budget".
"Also ensure that your policy schedule information of your new insurer is similar or better than your previous insurance cover. For extra peace of mind, ensure that your new cover is in place and active before you cancel your old insurance.
- Check that your banking institution does not have any mid-term cancellation penalties.
- Cross-check the end of your existing insurance and the start date of your new insurance, ensuring there is no gap or drop in cover.
- Validate the details. You will be responsible to ensure that your bank is provided with a copy of the insurance policy annually.
"Make sure your address is correct, the sum insured is adequate and the correct wall and roof construction of the house is declared".
"If you have any questions about building insurance, speak to your broker or contact us on 0860 444 444. Remember: if you’re an existing Santam client, you can add new items and make changes to your cover on the Santam client application."
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