Homeowners should have three types of insurance, one of which, homeowner’s cover (HOC), might not be familiar to many people.
This cover is essentially insurance against damage to the actual bricks-and-mortar structure of the home in the event of fire, flood, hail, high winds and various other natural and man-made disasters, such as someone driving through your garden wall or your geyser bursting.
The benefit of this type of insurance, explains Carl Coetzee, chief executive of home loan originator BetterBond, is that owners will not have to pay off the bond on a home that might have been destroyed or seriously damaged. The bank still gets paid, even though the property that was the security for your home loan is gone.
For this reason, the bank through which you obtain your home loan will generally insist on HOC. It will also usually offer owners an in-house policy with an annual premium that is automatically deducted from their home loan account.
“And while you don’t have to accept this policy and can source your own HOC, the bank will be entitled to request proof of insurance and to determine whether the cover is adequate. You will also need to make your own arrangements to pay the premiums.”
As with all forms of insurance, Coetzee says, one needs to make careful comparisons of the HOC policies offered by different companies, including the bank-owned insurers.
“You need to ask, for example, whether there are there any restrictions or exclusions, what if any additional benefits are offered, what excess is payable when making a claim, what the annual premium increase will be and what the company’s claim payment track record is.”
Meanwhile, if you have bought a sectional title property, he notes that the HOC insurance for the unit will fall under the overall policy for the whole sectional title scheme, with the premiums being paid by the body corporate.
“In this case, as well as with HOC on a freehold property, you should check very carefully to see exactly what is covered by the specific policy and that your home is insured for the full replacement value, not the current market value.”
Bond insurance is another which may be unknown to those who have not taken out big loans before. This policy, called credit life insurance, insures the bank against an owner’s death or disability. One of the benefits of this type of insurance is that the outstanding balance on your home loan would immediately get paid off should something happen to you.
Some bond insurance policies will even cover owners for temporary disability and retrenchment by paying the bond instalments for a specific period.
Contents cover is familiar to many and insures the home contents, such as furniture, appliances and electronics as well as personal belongings like jewellery, clothes and sports equipment.
“This is commonly combined with our vehicle insurance and, in many cases, these policies also provide cover against liability claims if someone should get injured on your property or in your car,” Coetzee says.