Your home is often your most valuable asset. And while the idea of losing it (and all its contents) is unthinkable, having insufficient insurance to replace it is an even more unbearable prospect.
Let’s take a look at some of the factors you need to bear in mind to be sure the insurance cover on your home properly meets your needs.
The sum you insure your house & contents for should ALWAYS match the price you’d have to pay to replace them.
If you’re unlucky enough to lose your home, or for it to be damaged in any way, you’ll only be paid out the amount you’ve covered it for. So if it’s worth R1-million but you’ve only insured it for R500 000, that’s all you’ll get.
Understanding the importance of ‘Average’
If you’re under-insured, you’re likely to find your insurer will apply an ‘average’ to your claim which basically means you’ll be responsible for the portion of your loss that isn’t covered.
So, say you incur damages of R300 000 on your R1m property, you’ll only receive a R150 000 pay out, because you’ve only insured it for R500 000. This will leave you R150 000 out of pocket and potentially, unable to afford to complete the repairs, or it could drive you to use inferior materials and finishes which will have an ultimately impact on the value of your home.
Update your home’s value regularly
Costs rise all the time, so it’s really important to have your home and contents revalued regularly. You should think about adjusting your Sum Insured every year or two to make sure you’re always adequately covered.
There’s often more to rebuilding than the costs of the materials and labour. You may need the help of an architect or surveyor, and there could be demolition fees too – all of which carry their own (variable) costs. So when you‘re calculating the costs you need to insure, don’t forget to factor these in too.
When you insure a property, it should exclude the cost of the land it stands on. This means you should only insure your home and contents (rather than the property’s potential sale price), as you won’t be able to claim more than the costs for rebuilding the actual building with all its infrastructure, fixtures and fittings.
New building requirements
If you live in an older property, you may find that rebuilding will involve you making upgrades to comply with current building regulations. For example: installing a solar geyser in place of an ordinary geyser. Again, these may add unexpected costs and it’s worth doing the homework up front to ensure your policy covers them fully.
You need to be able to provide proof of the household contents you own, as well as their value.
Home contents cover is always calculated according to its replacement value but in order to claim, you need to be able to prove you own certain items and what they are worth.
Keep digital records
Take photos or videos of your household contents (and corresponding receipts), then store them digitally, online in cloud storage, so you can access them anywhere, anytime.
Make an inventory
Download a free inventory app onto your cellphone and store the same information there or ask us for an inventory checklist.
Make electronic copies of your ID documents
If you lose your ID and you can’t prove who you say you are, you may have difficulty accessing your funds when your insurer processes your claim.
Even if you’ve chosen to exclude certain high-value items in your policy (such as jewelry, because you believe it’s adequately protected from theft in your safe), don’t leave them out of your inventory or they won’t be covered in the event of a fire or any other calamity.
Ask a professional valuator to do the job for you
It’s an onerous job so, if you’re unlikely to do it yourself, don’t leave it. Call in professional help.
When you need insurance advice, call us. It’s what we’re here for …
The purpose of insurance is to return you to the same position you were in before you experienced a loss, and we have the experience and know-how to advise you appropriately.
If you want to reduce costs, rather explore other ways of saving premium such as having a higher excess or installing additional security, than being under-insured. Especially when it comes to replacing the roof over your head.
* This article is provided for informational purposes only and should not be construed as legal or financial advice.