If you read through the fine print of a home insurance contract, you’ll come across some
seemingly strange eventualities that have been included. No doubt you’ll think that these will
never happen to you. But there’s a reason they’re there.
Although these risks are relatively small and improbable, the potential cost can be debilitating.
That’s why it’s important to make sure that you’ve got coverage that meets your expectations and protects you from things you couldn’t possibly expect. The best way to go about this is to empower yourself with the knowledge to make informed decisions.
Here are some key things to keep in mind.
What is Home insurance and how does it cover you
It covers everything that is permanent and immovable within the boundary of your property,
including things like the wall, garage swimming pool and all the fixtures and fittings.
It’s mandatory if you’re getting a home loan but should be kept after your home has been repaid. Home insurance does not protect you against damage that takes place over time.
Over time, things get damaged and compromised.
When something eventually happens that results in damage, people are surprised when insurance refuses to pay.
It’s important to remember that maintenance is the responsibility of the home owner and that insurance is there to protect you against unforeseen events, not naturally occurring degradation.
Your insurance is for the replacement value, not the market value.
It makes sense when you think about it. Insurance is not there to pay out market rates for the
property if something were to happen. It’s there to cover you for replacing what was. If you
have a multi-million rand home, but all the value is in the property, not the actual building, you won’t get much in the event of a fire. So what is your replacement value? This is a difficult question that gets many people into trouble.
You can find yourself in 1 of 2 buckets: over-insured or under-insured.
This is the biggest risk for home owners, as reported in an excellent piece by Roz Wrottesley
for personal finance magazine. In an interview with Christelle Fourie, the the managing
director of MUA Insurance Acceptances, the Qantum Risk Assessment report is discussed, which indicates that the average homeowner’s property is under-insured by as much as 35
percent. Christelle goes on to say: “Property is perhaps one of the most difficult assets to determine a replacement value for, because a rebuild is dependent on so many varying factors,”
If a claim comes in from a property that is judged to be under-insured, the homeowner has
shared liability to the extent of the under-insurance. The insurer will reduce the claim payout
by the percentage of under-insurance and leave the rest up to you.
In this case you are at risk for paying for something that you’ll never be able to realise the
value for. You won’t receive more than the claimed amount. Your coverage will inevitably change over time
Over time, these values also change with inflation and as the home goes through it’s own
evolution. When you add a pool, improve the kitchen facilities and the likes the cost of
replacement changes. That’s why it’s crucial to be transparent with your insurer. Let them
know when things change.
As with all insurance, it’s paramount that you read and understand the policy to ensure that
you’re receiving the coverage you expect and that matched your requirements. If you’ve got questions, speak with someone. Never take anything for granted. If you would like to speak to a professional about a Home Insurance Quote Click Here