If you own a house, you need household insurance. In fact, if you’re still paying off your bond, your home loan provider no doubt insists on it. But even if you don’t legally have to have it, household insurance should really be non-negotiable. Do you have the financial reserves to cope with a burst geyser and any resultant damage, for example? And what happens if a storm rips off your roof, or causes a tree to fall on it?
You might think the brick and mortar building in which you live is as safe as, well, houses. The truth is, a lot of things could happen that, unless you’re adequately insured, might end up crippling you financially. If you’re looking at taking out home insurance, or if you want to renew your policy, take a look at our home insurance checklist to help you prepare:
Even if you ignore all the other insurance advice you’ve ever read, do not ignore this! It’s the Number One and Most Important rule of home insurance. The insured value must reflect the cost of replacing your home in its entirety. In other words, the amount it would cost you to build your home from scratch, including all the fixtures and fittings and professional fees.
It’s important to consider the replacement value versus the market value. For example, your home might be situated in the most exclusive suburb in Johannesburg, with a market value of R25 million. But it would only cost a fraction of that amount to build from scratch. The rest of the value is derived from its location and garden, among others. If you insure your house for R25 million, and it costs R2.5m to rebuild, your insurance company will only pay out the R2.5m. So, you will have paid premiums on an inflated amount without any ultimate benefit.
Likewise, however, don’t underestimate the cost of replacing your home simply so that you can pay a reduced premium. You may find yourself having to make up a significant shortfall in the event of a claim.
Insurance companies are risk-averse. True story. The minute they detect any degree of risk, your household insurance premium will be affected. So, do everything you can to reduce your risk before applying for insurance. Fit security gates and burglar bars to all opening doors and windows, for example. Install a burglar alarm and smoke detectors, and upgrade the locking mechanisms on your doors, or install deadbolts. All these things improve the overall security of your home, reducing both your risk and your insurance premiums.
This is tedious, no question, but it is worth the admin in the long run. Go through your house room by room, and make a list of everything of value in that room. Some rooms go quicker than others! Pay special attention to electronic items, small appliances and jewellery. And don’t forget the garage – golf clubs and bicycles are expensive!
Create a spreadsheet on your computer, listing the items as well as their make, model, date of purchase and the price you paid. Take photographs of each item and scan them into the spreadsheet, along with scanned copies of receipts and any other proof of purchase. Having a list like this on your computer makes it easy to add or remove items at any time.
When you feel you’re as prepared as you can be, and the time has come to decide on your household insurance provider, take the time to go through their policy thoroughly. It’s very important to make all the important eventualities are covered. Your policy should cover you against such things as:
You can also obtain cover for optional extras, such as your garage doors and motor, swimming pool and/or borehole pumps, and any outbuildings. In certain areas in South Africa, you can even insure your home against damage from wild baboons or monkeys!
It really is worth taking the time to make sure your home is properly and comprehensively insured. The premium you pay every month is negligible compared to the cost of replacing your home or valuables if you don’t have insurance.
We hope you’ve found this household insurance checklist useful. If you need any more help or advice, or to find out more about our comprehensive household contents and buildings insurance, chat with CC&A Insurance Brokers today. As with any insurance product, you never know how much you need it – until you need it. We can help you work out what you need, and explain what your insurance covers and what your claims process will be.