Although building – or home owners’ - insurance is not compulsory, most banks require bond applicants to take out this type of insurance when granting home loans.
Building insurance protects the buyer and the bank from possible loss resulting from structural damage to the property. Buyers need to ensure that their insurance policy is in place before the registration of transfer when the risks of ownership transfer to the new owner of the property.
Although banks will insist that you have building insurance, you are not obliged to take up their insurance offering.
You can take out building insurance cover from any accredited insurer. Before selecting the product that best suits your needs and meets the requirements of the lending bank, you need to compare costs, coverage, benefits, reputation, and service levels.
Insurers and underwriters offer widely differing options, and certain policies may suit your specific needs better than others. How claims are settled also differs from one insurer to the next, so it’s essential to weigh up all the possible options before choosing a policy tailored to your needs.
The first step is to determine the correct overall value for the property, keeping in mind that you are looking at replacement values rather than the purchase price of the property.
There are several items in addition to the bricks and mortar of the primary structure and outbuildings which must be valued and included in the overall amount.
The replacement cost of the following elements should also be accurately valued:
• Fixtures and fittings, such as ovens and hobs, kitchen sinks, and sanitary ware.
• Hot water cylinders, heat pumps, solar panels, and photovoltaic batteries.
• Fixed recreational and ornamental structures such as decks, swimming pools, and water features.
• Paved and surfaced areas in brick, concrete, asphalt, stone, or synthetic grass.
• Boundary and other walls as well as fences.
• Gates and gate posts including mechanisms.
Unusual features could include:
• Tennis courts.
• Spa baths, saunas and associated machinery, and equipment.
• Satellite dishes.
• Borehole equipment supplying water for domestic use.
• Septic tanks.
Insurers will automatically increase your premiums annually, considering inflation and building material costs. However, if you have carried out any renovations you need to request a reassessment of your property.
Most insurers offer a guaranteed replacement cost coverage policy - at an additional premium - for insuring historical homes. The policy covers the cost of the complete rebuilding or restoration of a historic property.
This is particularly important if the property is registered with the South African Heritage Resources Agency, which specifies the use of certain materials, finishes, and building techniques in the case of rehabilitation.
Most building insurance policies also cover emergency service expenses. This includes:
• Security services to protect your property if it cannot be secured in the usual way due to an emergency such as a fire, for instance.
• Replacement of keys, locks, and remote-control units.
Some policies also cover the following situations:
• Alterations to your home if you are obliged to use a wheelchair.
• Accidental breakage of windows or other glass fixtures and sanitaryware.
• Damages to a garden caused by impact, such as a falling tree or other large object.
• Geyser wear and tear.
Buildings insurance is an important purchase so it’s important to take the time to carefully consider the options before making your choice. If you leave this task to the last minute, you may find yourself being under-insured in the event of a claim, or overpaying on your premiums.