Think before you thatch - thousands to be saved by researching insurance premiums ahead of home buying

Think before you thatch - thousands to be saved by researching insurance premiums ahead of home buying

After analyzing recent research, ooba (MortgageSA at the time) advised potential home-buyers to carefully consider both the location and structure of any house they are considering buying.

Bradd Bendall, National Insurance Sales Manager at ooba (MortgageSA at the time) aid research conducted by the company showed clearly how these two critical factors can have a major impact on your ongoing monthly costs, which amortised over the length of a home-ownership can run into tens of thousands of rands.

"While most homebuyers understand the value of getting the most affordable bond, what many don't realize is that a house comes with a number of ongoing running costs. Central to these is insurance on the structure of the house which is called buildings insurance, and insurance on your household contents.

"Both are impacted by where you live and what materials have been used in the construction of the house," he said.

Bendall cited the example of three houses with a building value of R 1,5 million and a household content value of R 500 000. In the first example the houses are located in different parts of the country, in the second in different parts of the same larger metropole.

Example 1

Located in Roseglen in Durban, Claremont in Cape Town and Linksfield in Johannesburg, the three houses returned a different set of premiums for both buildings insurance and household contents.

The Roseglen, Durban house?s buildings insurance premium was 29% cheaper than the equivalent in Linksfield, Johannesburg, followed by Claremont, Cape Town with a 27% difference in premium to that of Linksfield.

On the household content insurance premium Claremont, Cape Town fared best with an 18% lower premium per month and Roseglen, Durban next at 14% less than the Linksfield, Johannesburg house.

Bendall also pointed out that aesthetically pleasing aspects and finishes to a house can cost you.

"When we changed the structural specifications on the Linksfield house from standard - tile, roof and brick - to non-standard consisting of timber frame walls and a thatch roof the premiums jumped dramatically.

"The buildings insurance monthly premium rocketed by 454%, while the premium on the household content insurance doubled," he said.

Example 2

Bendall said the ooba (MortgageSA at the time) research revealed a similar pattern in price differentials on insurance premiums between different suburbs.

For example, taking three houses all with a building value of R 1 530 000, household contents value of R 500 000 and each with one motor car worth R 187 000, but located in Stellenbosch, Tyger Valley and Greenpoint your total all risks monthly insurance premiums including personal legal liability and policy fee would be between 80% and 102% more in Greenpoint, compared to Tyger Valley and Stellenbosch.

Although the premium for the building value of R 1 530 000 was a consistent across the three locations, the difference occurred in the premiums charged on house contents and the motor vehicle.

"If you have a couple of potential houses in mind, it's worth doing this kind of homework before making your final choice. It could end up saving you thousands over the length of your home-ownership," Bendall said.

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After analyzing recent research, ooba (MortgageSA at the time) advised potential home-buyers to carefully consider both the location and structure of any house they are considering buying.