Your home is one of the most expensive assets you will ever own. There is a long list of unfortunate things that can happen to it - from common annoyances like a burst geyser that ruins your carpet to unlikely, but devastating events like a fire that burns it to the ground. That’s where home building insurance can save you from significant financial losses as well as give you peace of mind.
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With building costs typically between R10,000 and R20,000 per square metre, completely rebuilding an average-sized three-bedroom home could cost between R1.5 million and R3 million, depending on where you live. The costs could be even more if you have premium finishings and fittings.
Ernest North, co-founder of fully digital platform Naked Insurance, says that a building insurance policy covers incidents that damage a home’s physical structures and permanent fixtures. The risks building insurance can protect you from range from natural events like floods, wind or lightning through to power surges that fry your gate motor or robbers that break down doors to gain access to your home.
"Insurers often say that if you could turn your home upside down, anything that will not fall out is a part of the home, and should thus be added to your building insurance policy. For the rest of the stuff inside your home, you would buy contents insurance," says North. Not only is buildings insurance a good idea, it’s also compulsory if you are financing your home through a bank.
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North says that you should strive to insure your home for what it will cost to clear and rebuild your home, rather than for its market value including the land. You don’t want to over-insure your building because that means you will pay a higher than necessary premium and not get paid out more than the costs.
But you also don’t want to under-insure because then an insurer will not pay out enough to cover repair or replacement of your fixtures or structures after a claim. Building costs are rising around 0.2% month-on-month—which means you should frequently check that you’ve insured your home for its full value with inflation taken into account.
Insure for replacement value:
The replacement value of your home will include all the costs of rebuilding, including building contractors’ fees, demolition costs, removal of rubble, municipal approvals and building materials. Some of these costs vary according to where you live, due to differences in labour and transport costs. It’s important to remember some of the non-obvious elements such as:
- Paving, driveways and paths;
- Gates and gate motors;
- Swimming pools and their pumps;
- External walls;
- Fittings and finishings;
- Flooring and carpeting;
- Water tanks, generators fixed to the property, inverters fitted to the distribution board, and rooftop solar panels; and
- Any other investments you’ve made in extending and improving your property.
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North says that many homeowners are investing in renewables to manage the loadshedding crisis. Given that the costs of solar panels, inverters and batteries can run from tens of thousands to hundreds of thousands of rand, it’s wise to update your policy when you install a solar solution for your home.
Consider getting a professional valuation:
The best way to establish your home’s estimated replacement value is to ask a property valuation expert or a building contractor to evaluate it. They will be able to analyse your home and compile a full report about the value of the structures and fittings. “You can also find out the average cost per square meter of building in your area and multiply it by the size of your home to get a rough estimate,” says North.
The value your home is insured for doesn’t necessarily need to be the same as the purchase price or the market value. For example:
- The market value of many properties in Johannesburg has gone down significantly in the last year or two. But the cost of rebuilding those homes, if they were to burn down, would still have grown.
- A home in a remote town may only have a market value of R1 Million, but considering its technical construction on a steep mountain side, the home should be insured for three times as much.
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Many people assume that they will need to insure their home with the preferred provider associated with the bank that granted them a home loan. But North says you are free to choose your own provider, so it’s wise to shop around to ensure you’re getting the best deal. Today, it’s easy to get a binding online quote from a digital provider’s app or website for comparative purposes.
These platforms use technology and artificial intelligence to deliver more convenient, relevant, affordable and transparent customer experiences. Because they are automated and efficient, they can offer significant premium savings over the old-school insurer. It takes just a few seconds to find out whether you’re getting a fair premium and sign up if you like what you see.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, explains the importance of knowing exactly what your insurance covers.
If you’ve done some renovations or improvements, here’s what you should check when it comes to your home insurance policy. To start with, it’s important that homeowners understand the two different types of home insurance:
Buildings insurance.
As the name suggests, this covers the structure of your home and its outbuildings, and their permanent fittings, against fire, damage and theft. If you own a house, make 100% sure you have buildings insurance. Regardless of whether you have a bond or not.
Home contents insurance.
This covers your stuff. If you could turn your house upside down and shake it, what falls out is home contents – clothes, furniture, TV, wine glasses, the lot. A lot of people don’t have home contents insurance.
Do a post-reno buildings insurance review
If you’ve got a bond, it’s compulsory to have buildings insurance. This is usually taken care of by your bank, and the premium is ‘hidden’ in your monthly bond repayment. But you’re not obliged to accept your bank’s quote, and it’s possible you’ll get a cheaper premium from the insurer that covers the rest of your valuables. So do shop around!
Insure for replacement value, not market value
A building’s insured value isn’t its market value. Buildings insurance should cover what it would cost to rebuild your property from the foundations up, including your boundary walls, solar panels, swimming pool, taps and tiles. It should even include what you would need to pay in a worst case scenario, like demolition charges and waste removal, and the professional and municipal fees that are part of the building process.
Review your home contents coverage
If you’ve built onto your home, and filled the new extension with brand-new furniture and appliances, this is a great time to update your home contents insurance as well. As with buildings insurance, the key is to make sure you cover your home contents for their current replacement value – don’t guess. And remember, insurers can only protect what they know about. It helps to keep the original receipts for items like big screen TVs, so that you can prove their value if you need to claim. To help you assess your home contents correctly, here’s a handy home contents inventory.
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