If you own a home with the help of a bond, then you are legally bound by the bank to have building insurance in place to protect their investment. But besides being able to pay back your bond should your home be destroyed in a fire, structural insurance also gives you the peace of mind that you will personally be adequately covered.
The difference between home contents and building insurance
Unsure of the difference between home contents and building insurance? Everything that is in your house - furniture and appliances - is covered by home contents insurance while structures like your walls, roof and floors fall under building insurance.
A good building insurance policy will cover everything that is permanent and cannot be moved. In other words your boundary wall, garage and gate (and the motors that power them), your swimming pool and borehole (and their pumps), any outbuildings such as a garden shed and, of course, the structure of the house and all fixtures and fittings. Additional insurance is available if you want to cover accidental damage to fixed machinery - ask your bank if they cover these types of thin in this eventually. It can save you a fortune against many types of disasters such as fire and flooding.
What kind of damages does it protect against?
Building insurance is essential to protect a homeowner against a total loss, in the case of a fire, earthquake, severe weather or other disasters. A total loss or write-off is when it will cost more to repair or rebuild a damaged property than what its insured value is.
While you may be able to afford a new geyser or a damaged floor, if a fire destroys your entire home and it has to be rebuilt, you don’t want to be left homeless. Building insurance should make provision for things like demolition and debris removal, in the case of a fire, and accommodation while your home is repaired. Most structural insurance policies also include some liability insurance should someone accidentally be injured on your property and sue you for damages.
Finally, your cover should also take into consideration an increase in building costs over the years. That’s why it’s so important to know the market value as well as the true replacement value of your home. Market value often depends on location - e.g. a bungalow in Camps Bay might not cost that much to physically rebuild but its prime position makes it super expensive in market value. Replacement value depends on what is being replaced, for example. a Victorian home with original features will cost a lot more to replace than a home in a new development. The insured amount should represent the current replacement value of a similar new property.
Do you have sufficient cover?
Santam claims statistics show that one out of three homes in South Africa is underinsured by as much as 30%. If you are underinsured, it means that the sum insured is less than the cost of rebuilding, repairing or replacing your buildings and structures. So, for example, if your home is insured for R500 000 but the cost of rebuilding it is R625 000, you are underinsured by 25%. That means that you will have to make up the remaining R125 000 yourself.
It’s clear from this example that it is very important to stay on top of your home’s replacement value. Santam has a handy building calculator tool to help you make an inventory of all the structures on your property. You can also ask for your broker’s help, or have a professional risk assessment done.
Switching cover from your bank or bond originator’s insurance
As we’ve mentioned before, it is a condition of your mortgage lender that you must have building insurance in place. This is to ensure that their investment is protected against any damages. However, you shouldn’t feel under any obligation to take out building insurance from your bank or bond originator. As with any type of short-term insurance, it’s a good idea to shop around, get various quotes and find an insurance option that works for your needs and your budget.
Also ensure that your policy schedule information matches that of your new insurer so that you get exactly the same level and detail of cover. For extra peace of mind, ensure that you get everything in writing - i.e. that your ‘old’ cover has been cancelled and that your new cover is in place. We walk you through the steps of switching insurers in this article.
Save on your premium by combining your insurance
Insure your home contents, cars and buildings with Santam and you could save on your monthly premiums. Switching is quick and easy, and you’ll get insurance good and proper that looks for reasons to pay you rather than not. Santam has 100 years of experience and the technical know-how, making us the experts on guiding you on how to best manage your risk and your premiums. Reduce your risk with a few simple maintenance checks, such as taking care of damp straight away, regularly checking electrical wiring and servicing your fire extinguishers regularly.
If you have any questions about building insurance, speak to your broker or contact us on 0860 444 444. Remember: if you’re an existing Santam client, you can add policies and make changes to your cover right here on the Santam client site.