A home loan is not the only thing you have to think about when purchasing a home; and many aspiring homeowners might be put off by the list of additional responsibilities that get tagged onto the home-buying process.
But, much like the home loan, these additional expenses produce significant long-term value for the homeowner, and are ultimately meant for the purpose of protecting your home, your most valuable asset. One such example is buildings insurance.
What is buildings insurance?
When you apply for a bond, its approval is usually conditional on you taking out homeowners insurance (also called buildings insurance). The purpose of this kind of insurance is to protect you – and the bank – from the risk of structural damage arising from unforeseen events such as fires, extreme weather events or burst geysers and pipes.
While you are not obliged to take the buildings insurance that your bank offers, it is compulsory for you to prove that you have this type of cover in place.
“Although this type of insurance is often a grudge purchase, once it’s in place, it is extremely useful to the homeowner,” says Craig Young, the managing executive of oobainsure, the insurance division of ooba home loans, South Africa’s biggest home loan comparison service. “Your insurer will become your first port of call in a household emergency.”
What does buildings insurance cover?
Some of the less well-known items covered by buildings insurance include:
- alterations to your dwelling should you become confined to a wheelchair (calculated as a percentage of the building insured amount)
- damage to garden caused by an unforeseen event
- emergency services expenses
- appointing of guards to protect your property
- replacement of keys, locks and remote control units for the home
- geyser wear and tear
- damage to electrical gate motors caused by an unforeseen event
- cost of demolition fees
- accidental breakage to fixed glass and sanitaryware
- the list goes on
Of course, there are also exclusions. These generally include wear and tear or maintenance.
“Simply put, what it boils down to is that if you become aware of any sudden damage to your home, you should call your insurer before you do anything else, to find out whether you are covered,” says Young.
The buildings insurance claims process
To claim, he advises contacting your insurance company before repairing out of your own pocket. You will need to be guided through the process. All insurance companies have their own panel of service providers that they will send out to do the work. You can use your own service provider for the repairs in some cases, but this is only if agreed upon; and the quote will need to be accepted by the insurer.
In an emergency, contact the insurance company’s emergency line for priority service.
What is an insurance excess fee?
You are responsible for any excess amount before the Insurer compensates you, or repairs are done. Before any work commences on your property, an excess will usually need to be paid. This can be paid directly to the service provider – such as a plumber or an electrician – in some cases. When the repair work is finalised, you will have to sign documentation in order to let the insurer know that you are happy with the work that has been performed.
“It’s advisable not to take matters into your own hands with emergency repairs,” says Young. “Always phone the claims call center as your insurer cannot be held liable for inflated prices charged by an independent service provider.”
Why you should evaluate your property annually
The Insurer will adjust your building Insured amount on renewal of your policy each year. This is to allow for inflationary changes in the value of your property due to the cost of rebuilding should a full or partial loss occur. It is always up to you to request a reassessment of your property if you have carried out any renovations.
“The main sum insured should be adjusted on renewal each year to allow for changes in the value of the property and the cost of rebuilding the property,” says Young.
Protecting your home
Although you are required to have buildings insurance in place to protect your lender’s interests, it is just as important to have the cover in place to protect yourself. It exists to help you protect your greatest asset, your home! “So use it when you need to,” concludes Young.
Buildings insurance illustrates the long-term planning that goes into homeownership, and the long-term value such decisions can produce. If you’re looking to purchase a home, ooba home loans, South Africa’s largest home loan comparison service, offers a range of tools that can make the home-buying process a lot easier. Start with their home loan calculators, then use the ooba Bond Indicator, a free, online prequalification tool, to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.