Insurance 101: A guide to getting the right cover

We get it… Insurance can be a daunting subject to tackle. But relax – we’ve got you covered! Check out these must-know facts that will ensure you are insured with the right cover.

House Insurance: This is also known as ‘Building Insurance’ on the actual structure of the building. This cover is vital when, for example, your house is damaged by a fire – this insurance will pay out for the damages to the structure and the repair of the building. It’s important to consider building insurance as structural damage – caused through natural disaster or an accident like fire – can run into thousands of Rands. It’s also comforting to know that you won’t need to cover the costs out of your own pocket or have to re-mortgage your home to do so. Tenants, however, don’t need building insurance, as landlords will have to cover any damages to the building he owns. If you’re a landlord, it’s highly recommended that you get building insurance for your home – as you’re most likely renting out your property for investment purposes.

Household insurance: This covers the content that’s within your house – such as your furniture and appliances. If there’s a fire inside your home, for example, this insurance will pay out for the loss and damages to the items within the house. Getting household insurance isn’t a requirement, but is cover that is strongly recommended. It’s a sad but true fact that break-ins and fire are rife in our country; so it’s important that you ensure that your belongings are covered for such a predicament. Landlords, however, don’t need household insurance on their let properties, as the tenants should cover their own household insurance – unless you’re renting out a fully furnished home.

Home loan/bond insurance
: This covers the mortgage repayment in the event of a death or disability of the borrower. It allows the family of the mortgage holder not to be left with the burden of the loan when the holder can no longer repay. Home loan is usually a requirement for or is a condition from the lender, like the bank – the lender will either take out the insurance within the mortgage agreement or the insurance premium will be included within the bond repayments.

The important details and facts to consider

- Take note of the excess amount – the higher the excess, the cheaper your premium should be.
- Ask what you can do to decrease your premium. Some insurance companies, for example, have deals with security companies where installing an alarm system could decrease your premium significantly.
- Call your insurance annually to see your premium is the best they can offer – after a year of no claiming, your premium should decrease.
- Make sure that all the information you provide is correct, and that the information is always up to date. Any incorrect information could lead to the insurance company not being able to pay out a claim – as they wouldn’t have been able to value your risk correctly.

When it gets to household insurance:

- Understand what their cover is regarding contents that will leave the home, like your cell phone, tablet or jewellery. ‘If these items are not specified, they may not be covered in the event of a loss.

- Understand what ‘new for old’ or ‘old for old’ means in your policy. This is a clause that your insurance company may only pay out for items that are at their current value (called ‘old for old’) or they may replace the old items with new items (the ‘new for old’).  For example, if you’re burgled and insured under “old for old”, your insurance company will only pay out the value of what your TV is worth today – at the depreciated value; meaning that you will have to foot the additional amount for a new TV. If you’re insured under “new for old”, the insurance company will pay out the value of the retail price of a TV currently.

When it gets to home loan insurance:

- Ask the insurer if it’s ‘own’ or ‘any’ occupation. This is a clause in the event of disability. ‘For example, an accountant has an accident that leaves him/her with brain damage where they can no longer work as an accountant: the “own” clause will mean that the insurance will pay the mortgage premium, as the lender can no longer do their “own” occupation. However, in the event of an “any” clause, the insurance company is not liable to pay the mortgage as the insured is still able to do “any” work, including cleaning the streets.  

Know what being under-insured means:
 If you estimate your household contents to be worth R80 000, but it is in reality worth R100 000, then you’re only covered for 80% of your contents. If you claim and you make, for example, a R50 000 claim, the insurance company will only pay out 80% of your claim (which amounts to R40 000). Even though your claim was less than what you have insured your contents for, insurance companies will not pay out in full as you were under-insured.  Rather get an assessor from the insurance company to come in and assess the value of your contents, so that you can know you are covered correctly.

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