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Home Insurance


HOME INSURANCE EXPLAINED

Home insurance has two elements: insuring the home itself and insuring the contents. Here are the most frequently asked questions about insuring your home and its contents.

Q: Is Home Insurance Obligatory?
A: Insuring your house, townhouse or flat is not only desirable. In South Africa it is to all intents and purposes mandatory, as banks are not likely to grant a mortgage bond if the homeowner does not agree to insure the structure.

Often a bank will deeply encourage the homeowner to insure through its associated insurance company, but as long as you insure the home, it does not matter which insurance firm you use. This leaves you free to shop around for the best deal.

Remember that your home is probably the most expensive and precious asset you own, so don’t skimp on insurance. The contents are probably of high sentimental as well as monetary value, so make sure you cover the contents sufficiently.

Q: What does home insurance cover?
A: The short answer is that this type of insurance covers loss or damage, but you should read the small print in order to see that there is not any onerous exclusion that could see you out of pocket if there were to be a fire or other disaster.

Q: What homes should be insured?
A: The rule of thumb is that your first home should have the building and contents insured, while investment properties only need building insurance. Where you let a property, the tenant takes responsibility for contents insurance.

Insuring the contents of holiday homes in South Africa is very expensive, so it is better to furnish and stock your holiday home frugally and cut out the expense of contents cover.

Q: What does a typical home insurance policy cover?
A: Usually this covers damage to buildings and/or contents through fire, storm damage, faults such as electrical shorts fires or leaky plumbing or through third party damage such as burglary. Make sure that unusual events such as hailstorms, bomb explosions and damage by vehicles. Building insurance generally cover damage to garden, garage and outbuildings.

Q: What is typically excluded from a home insurance policy?
A: Every insurance company is different, and in fact every insurance policy is different, so you need to check the policy to make sure what the exclusions. Typically excluded is damage or loss caused by subsidence, acts of war, flooding in flood areas and wind damage in hurricane areas.
There are three areas that the insured should look out for, which the home owner assumes are covered but which often are not:

  • Damage caused by pest infestation. Insurance companies regard the prevention of such infestation as being the duty of homeowners.
  • Long periods of time when the home is vacant may also not be insured. Consider adding a specific vacant property clause.
  • Although your home office might be right inside your home, do not assume that your office equipment is covered in your home insurance policy. You might need a separate policy for that.

Q: What other insurance is required?
A: Just because your vehicle is standing in the garage does not mean it is insured. It is not covered under home insurance and you will need a separate car insurance policy to cover this. Also, if you have anything of extremely high value, such as a work of art or a collectible, separate and specific insurance cover is required.

Q: Can I get insurance cover for every eventuality?
A: Yes, you can get insurance cover for absolutely everything, including a meteor falling on your home or a nuclear war destroying it. Remember that the more inclusions you have, the higher your monthly insurance payment will be. It is up to you to work out what amount of cover is sensible.

Q: What will home insurance cost?
A: The insurance companies have complicated algorithms for working out what your premium will be  It involves the value of the building and contents covered, the risk profile of the homeowner, the area in which the home is located and many other factors each year. This varies widely from property to property and from company to company. That’s why it is advisable to get as many home insurance quotations as possible.

Further Reading:

1. Home Insurance Defined

2. Making a Home Contents List

3. Tips on Saving on your Home Insurance Premium

 

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