Estate Living Magazine Estate Living Issue 29 May | Page 13

Insurance considerations
in high-value estates
Estate living has become very popular in our country, but homeowners in these environments need
to heed location-specific risks. Karl Bishop discusses.
mapping software clusters regions according
to their biggest perceived risks. As a result,
the geographic location of the estate itself
becomes important. Homes in estates can also
be configured close to each other, causing a fire
to have devastating results. The same goes for a
storm and the consequential flooding.
Karl Bishop
Head of Santam Specialist Real Estate
M
ore and more people are buying homes
in lifestyle communities, with around one
in 10 South Africans choosing a luxury gated
community when purchasing residential property.
This is according to Lightstone, a local business
that provides valuations and market intelligence
on property. One of the reasons estate living has
grown in popularity is its perceived security,
but this should not be considered “risk-free”.
While many people pick their property for its
stunning setting and elegant design, there are a
number of insurance considerations that should
not be overlooked.
Following the tragedy of the Knysna fires in 2017,
for example, it was shown that approximately
30% of the homes in high-value estates in the
area were inadequately insured. Homeowners
had gone with bank valuations, which take the
land and building structure into account, but not
the quality of the internal furnishings. This meant
that, on top of the emotional strain of losing their
homes, people also had to contend with being out
of pocket due to uninsured items.
To avoid issues such as underinsurance, there are
a number of factors to consider when looking to
insure a home in a high-value estate. Here are five
important ones:
1. Location, location, location
In the real estate business, location is key. This is
also true for insurers, but for different reasons.
With climate change causing natural disasters
to be more frequent and severe, sophisticated
When people buy homes, they usually see
the beauty of an area, not its risks. However,
homeowners need to be aware of what these risks
are, and what real estate developers have put in
place during the construction phase to mitigate
them. For example, does the estate have lightning
conductors, fire breaks, smoke detectors and
firefighting equipment? These are all important
risk management basics when living in an estate.
2. Should you trust your trustees?
As a homeowner in a sectional title scheme, you
are part of the body corporate and have every
right to ensure that the trustees are working to
reduce the estate’s systemic risks. In a sectional
title scheme, there are minimum legislative
requirements regarding cover that trustees
must adhere to. The insurance policy selected
by the trustees must furthermore comply with
the requirements of the applicable legislation,
for example the Sectional Titles Schemes
Management Act. A broker is usually employed to
assess the needs of the estate in order to ensure
that sufficient and appropriate cover is secured.
According to the amended Sectional Titles Schemes
Management Act, a replacement valuation of the
sectional title scheme should be conducted every
three years. Make sure the trustees are using an
experienced company, and be aware that, unlike
professional risk assessors, banks have different
means of conducting valuations. High-value
estates usually consist of homes with high-quality
finishings, which must be taken into account
when insuring against damages resulting from
catastrophe events. The trustees also need to
keep up regular maintenance of such properties.
Poor maintenance can compromise a claim.
3. Make it personal
While the trustees work hard to represent your
interests, it is your responsibility to ensure your
insurance is in order. This means adequately
insuring your personal assets. In a high-value
estate, people often have high-value home
contents and movable items. Ensure your house
and its contents are valued annually and renew
your insurance accordingly. Often, sectional title
homeowners get complacent and leave doors
and windows open. This makes these properties
vulnerable. Make sure you don’t become relaxed
about safety risks.
4. Unoccupied means unaware
A number of people have holiday houses in high-
value estates that can be unoccupied for large
portions of the year. If a house is unoccupied for
60 to 90 days, the insurance risk changes.
Imagine, for example, a holiday penthouse
overlooking the Indian Ocean. A storm hits, a
window gets smashed by hail and water seeps
in. Think of the damage this could cause if
undiscovered for 60 days.
If you know your house will be standing empty for
a while, be sure to inform your insurer and to ask
a managing agent or friend to pop in regularly.
5. Time to guard against cybercrime
Cybercrime has become a more prevalent and
dangerous risk in recent years. This may be
especially true in an estate where clustered
homes use the same network. Estates therefore
need to take pre-emptive risk mitigation measures
in the form of firewalls, antivirus software, and
regular due diligence regarding the host server
and service provider. There are also insurance
products that specifically cover cybercrime, so
it is worthwhile to seek a cyber-liability risk
assessment.
For more information about Santam,
visit www.santam.co.za.
If you feel your interests are not being represented
by your chosen trustees, table your concerns at
the next meeting.
Santam is an authorised financial services provider (licence number 3416).
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