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Getting down to basics: the nitty gritty of building insurance
Category Property News
Insurance is often regarded as a grudge expense, but it's one of the many unavoidable facets of owning property; especially building insurance which is usually mandatory when a home is financed.
Joanna Thomas, Area Specialist in Upper Constantia for Lew Geffen Sotheby's International Realty, says that although there is no specific law or regulation making home insurance compulsory in South Africa, most banks make it an obligatory requirement when granting home loans.
"This is to protect both the buyer and the bank from loss resulting from structural damage to the property and buyers must ensure that insurance is in place before the registration of transfer when the risks of ownership transfer to the purchaser."
She advises home buyers not to leave insurance to the last minute as rushing through the process could result in underinsurance as well as lack of cover for essential elements, especially if the property has unusual features or is an historic home.
Frans Labuschagne, Director of Cape Town-based insurance brokerage, FJL Consultants, agrees: "Although the standard cover for all insurance is basically the same, each and every insurer and underwriter differs to a degree, with different bells and whistles on offer and certain policies may therefore suit your unique needs better than others.
"The way claims are settled also differs from company to company as some adhere strictly to their underwriting, whereas others are more flexible and open to negotiation where possible."
However, selecting the right policy and ensuring one is adequately covered is not always as simple as it may seem when it comes to determining the correct overall value that should be ascribed to the property.
Labuschagne explains: "First you have to establish exactly which components are considered part of the building or structure as there are several elements over and above the bricks and mortar of the primary construction and obvious outbuildings which must be valued and included in the overall amount.
"Many people don't realise that in order to be adequately insured, the following elements should also be accurately valued: fixtures and fittings, fixed recreational and ornamental structures, paved and surfaced areas of brick, concrete, asphalt, synthetic grass or stone (not gravel), boundary and other walls, gates posts and gates including all their mechanisms and fences.
"Building insurance will also cover numerous non-essential features such as tennis courts, swimming pools, spa baths, saunas and associated machinery and equipment, satellite dishes, borehole machinery supplying water solely for domestic purposes and septic tanks."
Thomas, who has brokered the sale of many unique properties and is currently marketing an historic Constantia house, cautions that extra care must be taken when buying such a home.
"In such a case it's essential to shop around and compare policies and to ensure you highlight specific features and areas of value".
"And, in the case of a property that is registered with the National Monuments Council, insist on Guaranteed Replacement Cost coverage which allows for the restoration of your historic home. This would cover you for the full cost of rebuilding, or restoring, regardless of policy limit."
Craig Young, the managing executive of oobainsure, the insurance division of ooba, South Africa's biggest bond originator, says that although insurance is a grudge purchase, it can also be extremely useful to home owners as their insurers are their first port of call in an emergency.
"Many people are unaware that most building insurance policies also cover emergency service expenses, including security to protect your property should the unforeseen need arise, replacement of keys, locks and remote-control units.
"Some policies will also cover alterations to your dwelling should you become confined to a wheelchair, damage to your garden caused by impact, geyser wear and tear and accidental breakage of fixed glass or sanitaryware."
However, he advises that in order to enjoy the benefits of full cover, it is important to keep your property evaluation up to date and to advise your insurer when any alterations or renovations are done.
"The insurer will increase your premiums annually, taking inflation and building material costs into consideration, but it is up to you to request a reassessment of your property if you have carried out any renovations."
Young concludes: "Buildings insurance is one of the most important policies you will purchase and your bank will insist that you have such cover, but they can't compel you to take their insurance offering.
"You can obtain building insurance cover from any accredited insurer, which frees you up to compare costs, coverage, benefits, reputation and service and select the cover that best suits your needs best as long as you ensure it also meeting the requirements of the lending bank."
Author: Lew Geffen Sotheby's International Realty