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Karen Rimmer | A four-point guide on insurance for first-time home buyers

Karen Rimmer | A four-point guide on insurance for first-time home buyers
06-09-22 / Karen Rimmer

A four-point guide on insurance for first-time home buyers

Buying a home is one of the biggest investments most people will make in their lifetime, and it comes with a fair amount of stress. There are so many things to consider before signing on the dotted line: home loans, transfer duties, bond registration and of course insurance too.

For a first-time homeowner, figuring out what kind of insurance you need can be a bit overwhelming – to lighten the load, Karen Rimmer, Head: Distribution at PSG Insure has put together her four top tips to help you on your journey:

1)    Disclose all the relevant details to your insurer

Did you know that the type of property you buy will impact your need for insurance cover? There are three main types of residential property in South Africa: freehold, sectional title and property within an estate. Insurance policies for these property types will include specific clauses that pertain to the nature of the property.

“For example, with freehold or freestanding properties, mortgage providers usually require home buyers to take out insurance that covers the physical structure of the house,” explains Rimmer, “but in the case of sectional titles or apartments within housing complexes, body corporates are legally required to insure the physical structure of your home and to include the monthly premium as part of payable levies. However, what you need to bear in mind, if you have purchased an apartment with the intention of doing renovations that change the structure of the unit, you will need to get approval from the body corporate so that they can be in a position to advise the insurer accordingly.”

Similarly, if you do renovations to your freestanding home or add to it, your insurer should be informed, and your cover adjusted accordingly.

2)    Don’t forget your home contents

“Most first-time home buyers are acutely aware of the kind of insurance that prevents the financial fallout of a major incident like a fire, a burst geyser or the collapse of a part of the structure,” says Rimmer, “while these possibilities pose very real risks, they are only one half of the picture.”

Building insurance (which covers the structure of the home) does not automatically include the contents of the home – items like furniture, electrical appliances, your clothing or other personal items. Remember that insurance is not a static concept – you will need to review your policy regularly to ensure that any new items you buy still fall within the insured amount, or conversely, if you have scaled down, ensure that you are not over-insured. It can sometimes be more cost-effective to cover all your insurance needs under one policy, for example by combining your home contents and car insurance. Most importantly, remember that insurance is designed to cover very specific risks, as agreed between you and the insurer, which brings us to the next point.  

3)    Understand your responsibility as the policyholder

“Taking out adequate insurance should only be one part of your personal risk management strategy,” says Rimmer, “when it comes to determining your premium, insurers consider a variety of factors like the level of crime within the relevant area as well as what you have done as the homeowner to mitigate against potential risks.”

Installing home security systems such as a burglar alarms, security cameras, electric fences or making use of the services of a private security company, could go a long way in reducing your premium. You also need to be aware that certain of these elements may be prerequisites for taking out insurance, depending on how your policy is structured. It’s important to note that, once you have agreed to the terms of your policy, it is your responsibility to ensure your home security systems are maintained and in working order to avoid a potential claim rejection or unnecessary complications. Similarly, it remains your responsibility to ensure the necessary maintenance is carried out regularly to avoid preventable damage to your property.

4)    Keep your adviser in the loop

When it comes to ensuring you have adequate cover for the biggest asset you’ll probably ever own, it can be beneficial to talk to your adviser on regular basis. Insuring your property will afford you with peace of mind that your investment is secure even when the unexpected occurs.

“Each property is unique, and there is a myriad of eventualities that need to be considered. Your insurance needs will also change over time as your insurable asset base increase and decrease over time. An adviser won’t only help guide you on aspects, like how the claims process works, but they can also help to ensure your cover remains adequate as your personal circumstances and insurance needs change over the years,” concludes Rimmer.

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