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Estate living has become very popular in our country, but homeowners in these environments need to heed location-specific risks. Karl Bishop discusses.
Head of Santam Specialist Real Estate
More and more people are buying homes in lifestyle communities, with around one in 10 South Africans choosing a luxury gated community when purchasing residential property. This is according to Lightstone, a local business that provides valuations and market intelligence on property. One of the reasons estate living has grown in popularity is its perceived security, but this should not be considered “risk-free”. While many people pick their property for its stunning setting and elegant design, there are a number of insurance considerations that should not be overlooked.
Following the tragedy of the Knysna fires in 2017, for example, it was shown that approximately 30% of the homes in high-value estates in the area were inadequately insured. Homeowners had gone with bank valuations, which take the land and building structure into account, but not the quality of the internal furnishings. This meant that, on top of the emotional strain of losing their homes, people also had to contend with being out of pocket due to uninsured items.
To avoid issues such as underinsurance, there are a number of factors to consider when looking to insure a home in a high-value estate. Here are five important ones:1. Location, location, location
In the real estate business, location is key. This is also true for insurers, but for different reasons. With climate change causing natural disasters to be more frequent and severe, sophisticated mapping software clusters regions according to their biggest perceived risks. As a result, the geographic location of the estate itself becomes important. Homes in estates can also be configured close to each other, causing a fire to have devastating results. The same goes for a storm and the consequential flooding.
When people buy homes, they usually see the beauty of an area, not its risks. However, homeowners need to be aware of what these risks are, and what real estate developers have put in place during the construction phase to mitigate them. For example, does the estate have lightning conductors, fire breaks, smoke detectors and firefighting equipment? These are all important risk management basics when living in an estate.2. Should you trust your trustees?
As a homeowner in a sectional title scheme, you are part of the body corporate and have every right to ensure that the trustees are working to reduce the estate’s systemic risks. In a sectional title scheme, there are minimum legislative requirements regarding cover that trustees must adhere to. The insurance policy selected by the trustees must furthermore comply with the requirements of the applicable legislation, for example the Sectional Titles Schemes Management Act. A broker is usually employed to assess the needs of the estate in order to ensure that sufficient and appropriate cover is secured.
According to the amended Sectional Titles Schemes Management Act, a replacement valuation of the sectional title scheme should be conducted every three years. Make sure the trustees are using an experienced company, and be aware that, unlike professional risk assessors, banks have different means of conducting valuations. High-value estates usually consist of homes with high-quality finishings, which must be taken into account when insuring against damages resulting from catastrophe events. The trustees also need to keep up regular maintenance of such properties. Poor maintenance can compromise a claim.
If you feel your interests are not being represented by your chosen trustees, table your concerns at the next meeting.3. Make it personal
While the trustees work hard to represent your interests, it is your responsibility to ensure your insurance is in order. This means adequately insuring your personal assets. In a high-value estate, people often have high-value home contents and movable items. Ensure your house and its contents are valued annually and renew your insurance accordingly. Often, sectional title homeowners get complacent and leave doors and windows open. This makes these properties vulnerable. Make sure you don’t become relaxed about safety risks.4. Unoccupied means unaware
A number of people have holiday houses in high-value estates that can be unoccupied for large portions of the year. If a house is unoccupied for 60 to 90 days, the insurance risk changes. Imagine, for example, a holiday penthouse overlooking the Indian Ocean. A storm hits, a window gets smashed by hail and water seeps in. Think of the damage this could cause if undiscovered for 60 days.
If you know your house will be standing empty for a while, be sure to inform your insurer and to ask a managing agent or friend to pop in regularly.5. Time to guard against cybercrime
Cybercrime has become a more prevalent and dangerous risk in recent years. This may be especially true in an estate where clustered homes use the same network. Estates therefore need to take pre-emptive risk mitigation measures in the form of firewalls, antivirus software, and regular due diligence regarding the host server and service provider. There are also insurance products that specifically cover cybercrime, so it is worthwhile to seek a cyber-liability risk assessment.
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