If there’s one thing about life, it’s that nothing is certain, but preparation remains a timeless intervention. During this age of Covid-19, we have all come to understand, at least, the value of a good insurance plan. Long considered a grudge purchase, and for some, a system based on fear, insurance benefits are often only made real when a negative incident occurs. Without insurance the impacts of recovery can be financially catastrophic.
It is very important at the get-go to understand the different types of insurance in the market, and how they relate to a homeowner. To clarify these key concepts, we spoke to Natasha Osman, Absa’s Bancassurance: Head of Homeowner’s Comprehensive Insurance Cover.
“Firstly, there is the difference between short- and long-term insurance. There is a misunderstanding that these terms relate to length of time in relation to the product. This is just not true. Long-term insurance relates to cover in respect of, generically speaking, insuring an individual. Short-term insurance relates to protecting an individual’s assets and belongings such as a vehicle, the contents of a home, or the home itself.”
Generally a home is the greatest and most precious asset a person possesses, and a total loss of a property due to a fire or severe damage, which may be caused by a storm, could leave an owner in financial distress, particularly if the home is, as a result, uninhabitable. This is where the short-term homeowner’s insurance plays a role. It provides cover for the property, its permanent fixtures and fittings, and is, says Osman, affordable in terms of the cover it provides, giving peace of mind in the event of an unfortunate loss.
“Most banks include a homeowner’s insurance as a mandatory obligation of a home loan, the purpose of which is to ensure you and the bank are covered should there be damage to the property,” she says. “This really serves a homeowner well, for without it when there is serious damage, generally a homeowner does not have the surplus funds required for a rebuild or major repair.”
Also, there are perils that can come into play very quickly. A pot left forgotten on the stove or a spark from a wood-burning fire can very quickly escalate into a major fire with the myriad of flammable materials that generally comprise a home. This is why the first step when choosing such an insurance cover, is to understand what is covered and what benefits come into play.
“Most insurers have the same basic insured perils on a homeowner’s policy,” explains Osman. “These include damage caused by storms, fire, flooding, impact, bursting/leaking or overflowing of pipes and geysers. However, some have additional benefits that may be of value, or you may wish to include specifics. However, what is NOT covered requires equal understanding and that usually includes gradual wear-and-tear, which is usually caused by lack of maintenance of the property. Defective construction is also not covered for example.”
Once there is understanding of the ‘what and what not’, the next step must be to understand the financial obligation of the policy-holder, and here most importantly is the ‘excess’ structure. Osman explains that excess is the first amount payable to the insurer in the event of a claim and this differs among insurers. “For example, if a geyser bursts, the policy-holder is obligated to pay for a percentage of the repair, and the policy will cover the (majority) balance.”
The claim process is, generally, easy. A customer registers a claim with the insurer, an assessment is undertaken to determine damage, and if such is related to an event that is covered by the insurance policy, the repair/replacement is approved and actioned.
All this is relatively easy to grasp right? Not so much the policy wording itself. Policy terms and conditions, also known as the fine print, can be very confusing. The reader may respond to this as many of us do, which is to scan through the policy without full comprehension, sign and be done. This is not advisable, and is the reason Absa consultants spend time with their customers explaining if required, the finer nuances of the policy contract. These consultants are experts in their field and are committed to ensuring that the homeowner fully understands the terms of the policy, their obligations and that of the insurer
Although it is not imperative that the homeowner’s insurance is taken from the same institution as the bond provider, the option does provide the convenience we find most customers like., such as, :
• the convenience of a a seamless process, whereby customers are provided with an insurance quote for their prospective home , at the same time as applying for a bond .
• the customer would not need to go off insure and bring it back to the lender for vetting to ensure it meets their requirements in order to fully cover their risk
• premiums are collected automatically from the bond account, if this is what the customer elects to do, which ensures premiums are paid and cover is therefore always in place
• Claims registration is speedier, and can be actioned via the Absa website or even via Absa’s mobile banking App
“A real plus with an Absa homeowner’s policy is that it provides cover for alternative accommodation in the event that you and your family are displaced due to the occurrence of an insured event,” says Osman. “Also, if the property is rented out, the Absa homeowner’s insurance covers lost rental income due to the displacement of a legal tenant, again only if this is relative to an insured event having happened.”
Although as a homeowner you cannot predict what the future holds, with a well-structured insurance policy you can at the least remain prepared for any eventuality. An extra layer of protection is wise to protect one of the most important assets of your life.