LEGAL MATTERS
Homeowner ’ s insurance – the door to peace of mind
By Natasha Osman , on behalf of The Banking Association South Africa
Different property types require different types of short-term insurance policies .
According to different property types , short-term insurance is differentiated as follows :
Sectional title properties can only be insured on a body corporate insurance policy and cannot be insured by the owner of the property .
Properties used for business purposes , require a commercial insurance policy or a policy which extends its sections to include cover required by small businesses which operate from a residential property .
Residential properties used for residential purposes only are insured on a homeowner ’ s insurance policy .
Homeowner ’ s insurance is offered as a short-term insurance product , to specifically insure your residential property , its fixtures , and fittings .
Homeowner ’ s insurance covers the property , its fixtures , and fittings . This implies everything that forms the structure of the property , which include but are not limited to , the building , domestic quarters , outbuildings , garages , carports , paving and property walls .
All insurance policies provide you with a policy wording or policy terms and conditions , which explain insured perils and what is covered and what is not covered by your insurance policy . Homeowner ’ s insurance covers you for sudden and unforeseen damages , caused by storm , fire , flooding , impact damage , bursting , leaking , or overflowing of pipes and geysers , as well as other perils .
What it does not cover is gradual wear and tear and where damage is caused by lack of maintenance of the property , defective construction , as well as other exclusions . It is advisable to read and understand your insurance policy , to be aware of what your property is covered for and what it is not covered for .
Which type of homeowner ’ s insurance is mandatory and which is not ? Is this applicable to all segments of the market ? In South Africa there is no law which makes it compulsory for a person to insure their property . Most banks , however , do include homeowner ’ s insurance as a mandatory obligation of the home loan .
When you apply to a bank directly , through an agent or a mortgage originator for a home loan , the bank will request you to provide proof of comprehensive homeowner ’ s insurance for the full replacement value of your property before the finalisation and registration of the property . The purpose of this is to protect you and the bank from the risk of damage to the property , which could result in a financial loss .
Although it is not compulsory for you to take the insurance which is offered by the bank , agent , or mortgage originator , it is compulsory for you to provide proof of this comprehensive homeowner ’ s insurance to the relevant party and to have this cover in place for the duration of the home loan .
Homeowner ’ s insurance is not mandatory if your property is not financed .
What are the insurance requirements of a sectional title development versus a freehold property ? One needs to first understand the difference between a sectional title and a full title / freehold property . A sectional title implies that your property is part of a complex and you purchase the property itself within such a complex . A full title or freehold property refers to a property which is a freestanding property and when you purchase it , you purchase the full rights to the property , including the building and the land on which it is built .
The property type does certainly directly impact the insurance need for the property .
If you purchase a sectional title property , by law the body corporate must take out property insurance for the building structure . The premium is charged to the body corporate and they in turn charge the monthly premium as part of the levies , which the property owner must pay . The responsibility of insurance lays with the body corporate , in respect of a sectional title property .
With a full title / freehold property the insurance will be taken by you . The insurance policy issued is specific to the property , its fixtures and fittings and the insurance premium can be paid annually or monthly , dependent on your preference . The responsibility of insurance lays with you as the property owner , in respect of full title / freehold properties .
How would a homeowner go about finding out if they are adequately covered ? A homeowner needs to understand certain terms such as sum insured and full replacement value .
Full replacement value is the amount it will cost to rebuild your property should a total loss occur . This value considers additional costs , in the event of a total loss , such as rubble removal , engineer and architectural fees , hence making the replacement value higher than the market value of the property . It also considers the building structure , which includes , outbuildings , garages , swimming pools , walls / fences , security fixtures , paving and other permanent
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