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Category:
Insurance
News /
Short Term
Insurance /
Homeowners
/ February 2008
Update Homeowners Insurance Policy
The
climate is changing, whether patterns change and seasons are
funnier. South African cities like Johannesburg are experiencing
some “one week” summer season with the rest of the days in December
/ January being rainy and cold. Other parts of the country were
covered in floods as the skies kept on pouring down. It is
unpredictable what could happen tomorrow.
This
brings us to one almost easily forgettable issue, homeowners
insurance. It is somewhat easy to remember the household insurance
since it is sometimes included in every day vehicle and movable
property insurance but not the homeowners insurance. Maybe it is
time to revisit your homeowners insurance, the one that protects the
structure, bricks and mortar from natural born disasters like
floods, earthquakes, fire, etc..
The
National Credit Act confirms that you are not obliged to obtain your
homeowner's insurance (HOC) from the bank that provided your home
loan which might mean as we speak, you do not have homeowner’s
insurance or forgot to ask the bank about one when you applied for
your mortgage loan.
And that is just one of the aspects that suggests the need to treat
homeowners insurance as one would any other aspect of insurance like
life cover, children education polices, annuities, etc.
RealNet property group CEO, Tjaart van der Walt says that "home
insurance, whether it is for contents (furniture and other goods),
structure, or life insurance on the home loan amount, has become
increasingly relevant in your overall financial planning needs, but
is a seriously neglected part of most insurance portfolios.
"For example your home may be significantly under-insured as a
result of the steep rise in property values in recent years, or
because you have built on additions, and should that be the case,
you could find yourself badly out of pocket in the event of a loss
due to fire, earthquake or flood."
A home bought 5 to 10 years ago for about R500 000 may well have
doubled in market value to R1m now due to the current market
increments, and will no doubt have an even higher replacement cost
due to the increased cost of building especially now with cement
shortages due to building fuelled by the 2010 event.
If
the homeowners insurance is not adjusted or revisited, the cover
might still be covering the original R500 000 cost of the property.
Based on market value of your property currently at R1m in our
example above, the under-insured component of your property would
therefore be R500 000. If anything happens to your property, you
might find yourself half a million short
of
your previous home comfort.
However when deciding the correct value to insure one must actually
consider the price of rebuilding the house from the ground up, plus
the cost of demolition, professional fees and local authority
connections.
And, notes Van der Walt, it's not up to the bank to look after you
in this respect – especially if you obtain your homeowners insurance
elsewhere. "The onus is on you to make certain your home is
adequately insured – or to negotiate a discount if you have made
alterations that lower the risk, such as installing fire alarms or
upgrading the electrical system.
"Ideally you should value your property correctly every year, and
it's also important to keep your insurance up to date and intact
even after you've paid off the home loan since natural disasters
live beyond your mortgage life."
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