Can you afford not to?
Nothing is more devastating than returning from a wonderful holiday or even a day out to find that your house has been a shopping mall for “unsavouries”, or discovering that your geyser reached its sell by date and it leaked its contents onto your flat screen and Mac. Even though thousands of homeowners are burgled or endure damage to their homes every year, many decide to save on premiums and tempt fate.
The main obstacle to getting insurance cover is cost and the prevailing belief that insurance premiums are a waste of money, because the perceived risks are small. In fact they are relatively small but taking it on the chin because your gamble did not work out may put you in the poorhouse. The reality is that an insurance premium is a small price to pay when we get peace of mind and avoid potentially huge bills in the event of theft or damage to our homes.
If there is an outstanding bond on your home chances are you had no choice, your lender more than likely required you to secure homeowners insurance as a condition of finance. However you may have neglected to upgrade your cover over the years, or you may have even cancelled it thinking it offered no tangible benefit. If you just take the time to work out the cost of rebuilding your home in the event of a fire, or a significant burglary; you may think twice about skimping on this vital element of your financial portfolio.
A home owner’s policy does not only protect your home, it protects your possessions inside and out and also covers you for liability should someone get injured on your property. The main purpose of homeowners insurance is to protect your home and other structures, like a shed or detached garage. This coverage is the bread and butter of any homeowner’s policy. There are an astounding array of things that can go wrong. For example; lighting can strike a power line leading into your house- causing a fire or frying your electronics, a taxi can misjudge a bend and flatten your wall, or a tree could fall through your roof during a storm.
A good homeowner’s policy, will cover you in each of these situations so you don’t have to worry about the unpredictable.
A standard policy covers your house and possessions from damage caused by fire, smoke, lightning, hail, explosions, vehicles, theft and building collapse. Your policy won’t cover damage caused by neglect so don’t expect the insurance company to pay for soggy carpets if you don’t fix a leaking roof. Not only will your policy cover the cost of the damage (exactly how much depends on your policy), but also it will cover (up to a limit) your living expenses in alternative accommodation while you wait for your home to be repaired.
In addition to protecting your home, the typical homeowner’s policy covers your personal property as well. Your personal property consists of the contents inside your home, for example, furniture, clothing, sound systems, computer equipment, jewellery, sentimental items, -as well as outdoor items like sporting equipment and garden tools. Make sure that you fully understand what the policy covers; items like jewellery and computer equipment are usually covered separately so it is important to disclose these items to the insurers.
You will need enough insurance to cover 100 percent of the cost of rebuilding your house, but don’t confuse what you paid for your house with rebuilding costs. The land isn’t at risk from theft, fire or floods, so don’t include its value when you’re deciding how much insurance you need. Premiums are high enough without insuring what doesn’t need protecting. A good way to estimate replacement cost is by multiplying the square metres of your house by the local square meter construction cost. So if your house is 200 square meters and construction costs are R8000 per square meter it will cost you R1.6 million to rebuild.
Not only will your policy cover the cost of the damage (exactly how much depends on your policy), but also it will cover (up to a limit) your living expenses in alternative accommodation while you wait for your home to be repaired.
The good news is that home insurance is not expensive at all, you may find that all that is needed to buy a peaceful night’s sleep is to skip a few fast food meals and a bottle of good wine –a fair trade indeed.