Building Insurance Tips and advice
Your house or building is normally considered to be the largest risk item that someone would have. Losing this asset and not having insurance could ruin a person financially especially as the loan terms are for such a long period. Imagine you just purchased your dream home and within a year a storm destroys the building. Without insurance you would have to keep paying the current bond and try afford a new one at the same time.
So let us look at some various points to ensure you are getting the most out of your insurance and ways to reduce your premiums.
No underwriting done by banks
Don't Just Accept The Insurance That Comes With The Bond or By The Bank.
It is always advisable to use a broker to assist with your insurance as they can give the best professional advice. Most Brokers also have various insurers that they use to quote with which enables you the client to find the best cover at the lowest premiums without doing any work.
If your finance house or bond originator provides you with Insurance on the building, this is normally done with no underwriting and therefore you are given the same premiums as everyone else and is based solely on the area and value of the loan. If you are a good client with very little claims and a long standing relationship with your insurer, you should be able to get reduced premiums.
Taking standard cover that has no underwriting could also be the incorrect insurance for your needs which could result in non payment of claims. Such as buying a premises for commercial use but covering it under personal or residential policy.
Some finance houses also do not break down clearly what the premium is on your statement so you could be charged interest on this premium which will prolong your repayments terms.
You are allowed to take out Insurance where ever you like.
The FSCA makes it very clear that a client cannot be forced to take a certain companies insurance and must be allowed to obtain their own insurance with their preferred supplier. This allows you the opportunity to get various quotes and reduce your premiums and increase your cover. It also ensures that you are giving the correct information when obtaining quotes to ensure you are covered correctly.
Personal or Business
Just like your vehicle, it is important to note what your premises is used for. Most insurers will give a discount for there being someone at home all the time. You will also have to note if the house is in your own name or a company name. If it is rented out or used as a B&B then it is advantageous to insure this on a commercial policy as the additional extensions in cover will benefit you. It will also change the liability attached to the premises.
Underwriting Criteria
The problem with just taking the insurance automatically given by the bank is that there is no underwriting done. This means the premiums could be really high.
Using a professional Insurance Broker is beneficial as they will ask you the correct questions and get the solution that best suits your needs and often obtain much more competitive quotes. It is also no cost to the client to use the broker as the insurers pay the commission.
Important criteria to note on insurance:
- Is there Thatch on the premises
- The amount of geysers
- Is there open land nearby
- Will you be away from the premises for any extended period of time
- What is the premises used for
- how close is the nearest fire station
- Obtain the correct replacement value for the home (not the bond amount)
- Is it a main residence or holiday home
- What ground is it built on (subsidence and landslip)
- What are the walls and roof constructed of
Knowing what is not covered
When buying anything, you always want to check the fine print. When buying food you would check the expiration date so why would you not check the details on your most expensive asset.
Firstly is knowing the difference between and insured peril and wear and tear. Sudden bursting of pipes is covered but if it is over time and due to corrosion then it would not be insured. Damage by wild animals is normally covered however vermin and infestation is not. Water damage to the property say due to a leaking geyser damaging the interior roof and floors would be covered however leaving a tap on that leaks would not.
Most insurers will also check at the time of a loss if the property was maintained well. This is where most of the claims are rejected on insurance policies. The onus is on the property owner to ensure that their property is well maintained to make sure that claims are not happening because of wear and tear. Take for example a roof that is leaking due to not being sealed properly. The damage that will occur to the inside of the premises will happen gradually as drips occur. This loss could easily have been mitigated by repairing the leak.
Final thoughts
You have purchased a high value asset so ensure that your insurance covers it correctly. Shop around and do not just take insurance that is added without you knowing what the policy entails.
Brokers are not going to cost you extra and therefore it is wise to use a professional to make sure that you are getting what you need from your insurance and that the cover is properly explained to you.
Keep your property well maintained as this will reduce the chances of you claiming or having your claim rejected.
Make sure you note any material fact that could influence your insurance.