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 incidents like a burst geyser that ruins your flooring to less likely, devastating events like a fire that burns it to the ground.
To keep your investment safe, you need home building insurance, which can guard you against significant financial losses and give you peace of mind that if the worst happens, you will soon be able to return to normal.
A building insurance policy covers incidents that damage a home’s physical structures and permanent fixtures. The risks building insurance can protect you from is damage caused by natural events like floods, wind or lightning to power surges that destroy your gate motor or burglars who break down doors to gain access to your home. With building costs typically between R10 000 and R20 000/m2, completely rebuilding an average three-bedroom home costs between R1.5 million and R3m - depending on where you live. The costs could be even higher if your home has premium finishings and fittings.
Building insurance is a good idea for all property owners – and compulsory if you finance your home through a bank.
“It’s important not to over-insure your building because you will pay a higher premium than necessary. If you claim, your insurer won’t pay out more than the costs incurred," says Ernest North, co-founder of digital platform short-term insurer, Naked Insurance.
On the other hand, you don’t want to under-insure because then your insurer will not pay out enough to cover repairs or replacements of your fixtures or structures after a claim.
Replacement value
When calculating the amount to insure your home for, you need to find out what it will cost to clear and rebuild it. This is not related to the market value of the property.
The best way to establish your home’s estimated replacement value is to ask a property valuer or a building contractor to do a professional valuation. They will be able to provide a full report on the structure and fittings.
“To get a rough estimate, you could find out the average cost per square metre for building in your area and multiply it by the size of your home,” says North.
North says that building costs are increasing by about 0.2% each month. This means you should frequently check that you have insured your home for its full value taking into account inflation.
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 because of differences in labour and transport costs.
It’s important to remember some of the less obvious elements, such as:
● Paving, driveways and paths.
● Gates and gate motors.
● Swimming pools and their pumps.
● Boundary walls.
● Fittings and finishes.
● Flooring.
● Water storage tanks, generators fixed to the property, inverters fitted to the distribution board, and rooftop solar panels.
● Any other extensions and improvements to your property.
Many homeowners are investing in renewables to manage the load shedding crisis, and the cost of solar panels, inverters and batteries can run into hundreds of thousands of rand. North says it’s wise to update your policy when you install alternative energy solutions for your home.
Insurers
Many people assume that they are obliged to insure their home with the insurance provider associated with the bank that granted their home loan. This is not so, and it’s a good idea to shop around to ensure you’re getting the best cover at the right price.
Many insurers issue online quotes 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 sometimes offer significant premium savings over traditional insurers. In just a few minutes, you will be able to find out whether you’re being offered adequate cover at a fair premium - and can sign up on the spot.
Writer: Sarah-Jane Meyer
