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Know Your Policy – Part 3; Residential Buildings Insurance

By Kayser Baird | Durban | October 8, 2014

Many homeowners still have their residential building insured with their bondholder, often paying high rates while being underinsured

~Kayser Baird Insurance

Historically in South Africa it was a bank requirement that you had to insure your building with the bank that held your bond. This is no longer compulsory and you may insure your residential building with any of the leading insurers. Despite this, many homeowners still have their building insured with their bank, often paying high rates while being underinsured at the same time.

If your buildings insurance for your house has been with the bank for a long time, it is possible that your sum insured for your house is still based on your original purchase price, and may be significantly lower than the correct insurance value which would be the cost to re-build your house and the other fixed improvements. Different banks apply different inflationary increases and depending on when you bought your home, your sum insured may not accurately reflect the cost to re-build your home. If you have changed your house contents and car insurance recently, you may have reviewed these covers, but forgotten about your buildings insurance which is even more important.

Your house will probably be the most expensive item that you will ever buy – being underinsured can be devastating as you will not be paid out in full irrespective of how big or small your claim is.

What is the correct value to insure my house at?

Your Residential Building should be insured at the full replacement cost/value of all fixed improvements on the property (not just the main building). The municipal value is not the correct value to insure at, and neither is the market value. Your house may have high quality fixtures and fittings in which case your house may be worth more than an identical house with less valuable fixtures and fittings.

Many people wrongly assume that because the risk of suffering a total loss is quite small, they can insure their house for less than the replacement value and be able to claim for smaller losses. This is incorrect, because if the house in under-insured average will be applied to the claim and the pay-out will be proportionate depending on the extent of underinsurance. In other words if your house is insured for R1million but the replacement is R2million – you would only be paid out half irrespective of how small your claim was.

What does my Residential Buildings Insurance cover me for?

You will be covered for damage or other losses to the structure of your house, garage, swimming pool etc for the following hazards;

Other Information about Residential Buildings  insurance

Kayser Baird offers a number of convenience benefits in our Santam and Hollard buildings products and will ensure that you have the best possible cover at competitive rates. If you would like to find out more about this cover please contact us.

 

Next week in “Know Your Policy” we look at the sometimes contentious issue of your policy Excess or First Amount Payable in  Part 4 – Your Policy Excess Structure.

Read previous posts in the “Know Your Policy” series;

Part 1 – The Average Clause
Part 2 – All Risks Cover

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