As new potential home owners consider entering the property market, and existing home owners ponder how to budget for the future, the issue of home, or building, insurance has been highlighted. It may be obvious yet some still confuse the term ‘home insurance’ with the policies that are offered to insure the contents of the home, that being those items that are generally not ‘fixed’ but used to fill the property, such as furniture and valuables that could be carried away in the case of theft, or damage as in a fire.
Whether contents or buildings, both are considered as short-term insurances. Short-term means very simply that it covers a ‘thing’, unlike long-term insurance which is usually related to a human being. Insurance is also based on risk, which you transfer to the insurer by paying a premium against that risk, so that if you lose the item that you insure, you are covered by the policy.
Buildings insurance covers the cost of repairing damage to the structure of the home, and in theory that means the cost of rebuilding the house from the ground up should it be destroyed by external factors beyond the home owners control.
Such factors may include:
Natural disasters, such as a flood
Accidental fire, smoke damage, explosions
Damage as a result of a falling object, eg: lampposts, trees, even an aeroplane
Vandalism or malicious damage
Subsistence – when the support structure of the home is compromised.
Obligation
Building insurance is not necessarily the law in the general understanding of the word, but it is mandatory for most bond providers when you purchase a home. Without it you will not be able to proceed with a home loan application and if a policy has lapsed, the home loan provider has the right to seek damages including foreclosure.
It is also crucial the home owner understands that it is their responsibility to ensure that the amount agreed upon in terms of replacement, or sum insured is true and reflective, which can impact on the pay out of a claim. Home owners can source this information from the home loan provider or use online cost replacement calculators such as those offered online, but ensure that in so doing, you access a calculator applicable to local and not international processes.
Improvements to the home also have to be factored into the level of insurance, which may change the premium. Home owners also need to be aware of annual premium escalations to ensure affordability.
Basic coverage and choice of insurer
Generally, the majority of home loan providers such as banks, have their own version of property insurance, however the customer has the option to choose an alternative insurance provider if they can issue proof that such insurance is in line with the requirements of the home loan. Most applicants opt for the package offered by the bond supplier, which simplifies collection of the premium via the bond.
How comprehensive is the insurance?
Buildings insurance is also usually comprehensive and developed to offer customers at least the essential cover required. The cover accounts for a large number of insured events that could cause loss or damage to the property insured, which outside of stated external factors, may even be those that cause leaking, bursting, and overflow of water-carrying equipment, such as geysers.
Anton Davies, Head of Client Solutions at Nedbank Insurance clarifies further. “Replacing a completely destroyed house may result in additional costs, which may be upwards of 30% of the value of the house. This covers demolition, waste removal, architectural and other specialist services, as well as temporary accommodation for the occupants while the house is being rebuilt, so it is crucial to ensure your plan covers these costs.”
Davies emphasises that while the bank wants to look after its loan, the client should be seeking to look after their asset. “The last thing anyone wants to discover is that there is no valid claim when something goes wrong. As a result, it is important to consider all terms and conditions, especially the exclusions in the insurance plan. Consider too, what the obligations of a home owner are, as many insurance plans require the home owner to perform a minimum amount of care and maintenance to the premises.”
How do you know the policy works?
It’s not an easy market to navigate however given the number and type of insurance plans that are available. “They look increasingly similar,” says Davies. “The real differentiation comes through the customer experience, which is best realised at claim stage. Most insurers work with a professional group of tradespeople for the different things that can go wrong in the home because both the home owners and the bank need to be able to rely on competency, professionalism and the minimal of inconvenience.”
The geyser
Emergency claims are more often than not those related to geysers, which have a knack of bursting after hours. This is also the most common scenario that engages the need for activating the home building insurance to ensure that emergency relief can be provided post haste. “You will generally find two levels of service standards; emergency service provision, and normal claims. However, there is a special category outside of those two; claims that affect not only the client but also individuals in an area, such as in a storm, flooding or fire disaster,” explains Davies.
While the endeavour is to restore the client to the pre-event condition within the services standards applicable, the shortage of suppliers may put pressure on service standards.
At Nedbank Insurance we therefore provide a 24/7 emergency claim system that can be accessed through our digital channels or via a contact centre. We fast-track geyser and plumbing claims to ensure that our client can be returned to the same position as they were prior to the loss, and as quickly as possible.”
Technology responds
Telematics is playing an increasingly important role in this industry when it comes to geysers and water supply devices. Nedbank Insurance have pioneered Senseable Geyser Telemetry in response to expectations. “The Senseable Geyser is a smart device that monitors the geyser and proactively suspends the water supply and electricity if there is a chance the geyser may fail,” says Davies.
“But that’s not all. The sensor also sends the home owner a notification via the Senseable App as well as to Nedbank Insurance, which speeds up the FNOL (first notification of loss), saving considerable time on lodging and processing a claim, and the dispatch of a plumber.” This type of technology is also allowing remote control of the energy consumption of geysers, the on/off times, and temperature.
Excess
As with any short-term insurance policy, ‘excess’ comes into play. Insurance excess is the amount the client agrees to pay when making a claim on the policy. This is determined at the start of the policy, although it can be re-negotiated, and a general rule of thumb is the higher the excess, the lower the insurance premium. It protects the insurer against small claims that can overburden the system.
The advice that Davies gives is to try to keep the excess as low as possible because in the event of a claim, the home owner won’t need to struggle to find funds to pay this part of the claim. “Although this comes at a higher premium, peace-of-mind is important.”
Maintenance
Any contract of building insurance puts some onus on the home owner to maintain the property. These can be smaller things like keeping gutters clean to larger potential problems like removing dangerous trees that could damage foundations or fall onto the roof.
Nedbank Insurance includes client education in the Nedbank Home Loans statements to ensure that all clients regardless of who the insurer is, understand their obligations as the insured and can avoid pitfalls, as well as being informed of any trends that are emerging.
Home owners must at all times take some responsibility for the integrity of their home. A major crack for example, could mean the structure of the home has been compromised, or ignoring serious rising damp may be indicative of a rising water table beneath the home. At least every two years, an annual inspection of the home should be undertaken, especially noting the condition of the exterior of the home. While it may be that a building insurance is the fallback, it is the inconvenience of having major structural repairs undertaken that can be very invasive.
