Is Your Home Properly Insured?

All this talk about global climate change seems to have affected local weather, too. Climatic patterns are getting strange and the seasons are acting zany. The last summer in Johannesburg seemed to have only a week of sunny weather while the rest of it was cold and rainy. Floods come when you least expect it, and where it should be sunny, rains are pouring down instead. Weather has never been more unpredictable.

The vagaries of weather all have deleterious effects on your home and, along with other risk factors to your home, should remind you of your homeowner’s insurance. Is your home properly covered?

You’ll probably have little problems with household insurance, which provides cover for the furniture and other contents of your home. You can usually obtain cover for it along with other movable property insurance. Besides, the cost of replacement for these items, although significant, should not be so substantial as to send you to the poor house.

Home insurance for the structure is a different matter. It gives protection cover to the physical home – the bricks and the mortar – from the physical risks of floods, fire, and other natural disasters. If some calamity befalls your home and you are without homeowner’s insurance, you will have the Herculean task of rebuilding your home using your own capital. Worse, if you still have an outstanding balance on your home loan, you will find yourself without a home and with a mortgage to pay.

It makes sense to have insurance cover for your home. That is why the banks insist on it. But are you adequately covered?

Consider the last time you made adjustments in the amount of home insurance cover you purchased. You may have bought a home for R400 000 ten years ago. Every year thereafter you could have insured the structure based on that value, not least because you want to save on premiums.

But over the years, the market value of your home could easily have risen to over R1m. Perhaps more importantly, the cost of replacing your home, in case something happens to it, will be so much higher now. No one will dispute that the cost of building has increased steeply with rising cost of materials and projected cement shortages.

Or you may have made modifications and improvements to your home, adding a bathroom or a bedroom or renovated your kitchen, and all of these would have further raised the replacement cost of your home. The point is that the value of your home insurance may have lagged behind its replacement cost. If something were to happen to the home, the settlement possible from your home insurance would be enough – not even to build a much smaller home. And that’s assuming it will not all go towards paying off the mortgage.

Remember, having adequate insurance on your home is your responsibility. Some things to watch for in your insurance policy:

1. Make sure your insurance provides at least for replacement value, not the depreciated value, of your house.

2. For insurance purposes, the insurance cover should take into account the cost of building a replacement to your house, which could well include demolition costs plus engineering and other professional fees. If there is an outstanding mortgage on the home, that amount should also be included in the insurance value.

3. If you renovate the house or add any enhancements, inform the insurance company so that the amount of cover may be adjusted correspondingly. If the alteration helps to reduce the risk of damage to your home, it could result in reductions to your premium.

4. Check the fine print on your policy very carefully. Determining proper cover also means knowing exactly what the home insurance includes and excludes. Many times, you must know the exclusions. A burst geyser may be covered but resultant damage to ceilings and walls may not, for example.