What is homeowners building insurance?

When you own a home, it may feel like the chances of losing it are slim. But it is one of your most valuable possessions and one that would be devastating to lose.

In addition, your home could be extensively damaged by weather or an accident and most homeowners would struggle to find the funds for repairs.

Homeowners insurance or building insurance covers you for losing your home or it being damaged as a result of:

Storms, lightning, hail, wind or snowfalls;

Fire;

Floods;

An earthquake;

An explosion;

Subsidence or a landslide;

Malicious damage;

Theft or attempted theft of fixtures;

Bursting, leaking or overflowing pipes;

Damage caused by impact; and

Damage by wild animals.

Some policies may exclude or provide limited cover for certain events such as an earthquake or floods in areas that are prone to these events, unless you specifically request cover for these at an additional cost. Be sure to check you are covered for all events.

Homeowners insurance covers all permanent immovable structures and boundary walls within your property, including your garage, gate, swimming pool, granny flat and even your solar panels.

If you live in a sectional title property, the property is typically insured collectively and the cost included in your levy.

Household contents insurance for the furniture, clothes and any other possessions within your home may be covered on the same policy but is not included in this article which focuses on insurance for the building.

How much cover do you need?

You should insure your home for the cost of replacing it if it was totally destroyed – what it would cost to build it again, and not the market value for which you could sell it tomorrow.

The cover should include the cost of demolishing a structure damaged beyond repair in a fire, flood, explosion or landslide and the clearing of your plot.

It is difficult to estimate the cost of rebuilding your home, especially if you have lived in it for many years.  For peace of mind, get a professional valuer to help you estimate the cost.

Underinsurance is a big risk – if your home burns to the ground and an insurance assessor comes to the conclusion you underinsured your home at, for example, 60 percent of its value, you will be compensated for only 60 percent of the loss or damage.

Insurers say most people underestimate the cost of rebuilding their homes and the only time a rebuild would be less than the market value of the property is when the land itself is very valuable, because, for example, it has a view or is in a sought-after location.

The amount of cover you have needs to be adjusted annually in line with the costs of replacing your home and all its fittings and fixtures. You also need to adjust your cover amount if you make additions to the house.

Check with your insurer if it excludes cover for any extras or limits cover for any fittings.

A home loan may necessitate cover

If you take out a home loan to finance your home, the loan may be conditional on you having homeowners insurance in place. The home loan provider may insist on approving your cover and may offer you approved cover from an insurer within its own group or from an approved provider. You are not obliged to take the cover you are offered by the home loan provider, but your choice of provider and policy you do take out – including the amount for which you are covered - may need to meet the home loan provider’s requirements.

Remember that while your home loan provider may insist you have cover for a certain amount, you cannot rely on this as the replacement value of your home. Your home loan provider is only looking to cover its loan to you.

How do you take out homeowners insurance?

You can use an insurance broker or you can call an insurer directly.

Insurers typically ask for details of:

The structure of the walls;

The number of rooms;

The style of roof, for example, if it is tiled, slate or thatched;

Whether there are fireplaces;

Whether gas is used on the premises;

Additional structures, such as a garage or granny flat;

Whether the house is a private home, holiday home or used for business purposes;

How many days of the week the premises are occupied; and

Whether the location is suburban or rural.

What does homeowners insurance cost?

Homeowners insurance is typically paid for by way of a monthly premium which escalates each year. Some insurers sell cover for an annual premium. The costs vary depending on:

Where you live;

The structure of your home;

What you have claimed for in the past on the policy or with other insurers;

The value of your structure;

The excess you agree to;

The value-added services or products your policy offers.

What is not included

It is important to remember that homeowners insurance is not a maintenance plan. You cannot let your roof fall into disrepair or the roots of a tree crack your garden wall and then claim for a leak or a collapse.

Even if your roof blows off in a storm or your garden wall falls down in high winds, if it was compromised to begin with, your claim may be rejected.

The event that causes the damage should be sudden and unforeseen - not a gradual state of disrepair.

You will also not be covered if you use sub-standard materials – for example, if a wall built with substandard cement collapses.

You may be covered if your geyser or a pipe bursts unexpectedly and your home is flooded, but if you live in an older home where the pipes burst frequently, an insurer may exclude cover for this event.

Don’t expect to get damages covered by your insurer if:

Your pets cause damage to your home, for example, your dog digs up your carpets or floor tiling;

You have mould or mildew, for example on your bathroom ceiling;

You have an infestation of pests, for example, beetles attack your flooring;

Tiles or sanitaryware are damaged, for example, if you drop something on the kitchen floor and chip the tiles; or

Trees being felled damage your home, but if a tree falls over in storm and damages your home, you may be covered.

Cover limits

Homeowners insurance typically has some limits on benefits including:

• The cost of renting alternative accommodation if your home is uninhabitable (often a percentage of the sum insured);
  
  
• Compensation for the loss of rental income if you are letting a property or a portion of it;
  
  
• Compensation for loss of water;
  
  
• The cost of the removal of fallen trees;
  
  
• The cost of tracing of leaks;
  
  
• Emergency expenses for visitors who are injured in your home if this included;
  
  
• Emergency expenses for domestic employees injured in your home if this is included; and
  
  
• The cost of employing security guards to protect the property after an insured event.
  
  

Special conditions

Many homeowners insurance policies require you to inform the insurer if:

• You do any renovations as your risks increase during this time. When the renovations are complete you will need to increase the value of your insured amount;
  
  
• Your home is unoccupied for more than two months.

Cover for riots and terrorism

Most insurance companies include a small premium for cover provided by the South African Special Risks Insurance Association (Sasria) for social disorder, or acts aimed at political, social or economic change.

Sasria is a self-financing government body that provides cover for certain risks defined in the Reinsurance of Material Damages and Losses Act of 1989, including riots, terrorism and strikes.

How to claim

In order to claim on your homeowners insurance policy, you need to provide the insurer with details of the event.

The insurer may send an assessor, or it may request three quotations for repairs or rebuilding your home before the amount it will pay is finalised.

An excess may apply

Many homeowners insurance policies include an excess – the initial amount of the claim that you must pay before the insurer pays the remainder of the claim.

Typically, the higher your excess, the lower your premiums.

Your policy may have different excess amounts that apply to different claims.  

Value added services or products

Homeowners policies may include some added cover that you may not expect:

• You may be able to access assistance in certain emergencies, such as, having the locks changed on your doors after a burglary;
  
  
• Your pet may be covered for injuries in a road accident;
  
  
• Your excess may be waived if you are over a certain age; and
  
  
• Cash paid back to you if you do not claim for a certain period.

Remember all these add-ons are priced into your premiums.

Personal liability

Homeowners insurance policies may also include personal liability cover for accidental deaths or bodily injuries or illness of another person that on your property, as well as accidental loss or damage to property belonging to another person. This may include visitors and people working at your property such as a domestic worker.

This cover may also include your dog biting someone on your property or in the park when you take it for a walk.

This article was reviewed by Molebatsi Langa, head of strategic accounts at Old Mutual Insure