Insure your property properly

It’s a good idea to review your insurance provisions from time to time and make sure you have the correct cover for your home and any other properties you own.
“As a priority,” says Harcourts Africa CEO Martin Schultheiss, “you need a policy that protects you in the event of damage to your home by storms, fire, flooding or any other major disaster. This is called homeowner’s insurance and is essential even if your home is not bonded, or you could find yourself having to meet substantial repair bills or rebuilding costs out of your own pocket.
“Even worse, if your property is bonded and you don’t have the proper insurance, you could end up without a home but still owing the bank the outstanding amount on your home loan.”
When deciding how much insurance to take out, he says, you should bear in mind that building costs go up every year, so you need to insure your property at the current replacement value and not at the price for which you bought it or even the current market value. As an indication, the difference in price between newly-built homes and similar pre-owned homes is about 15 to 20% at the moment.
“And even if your homeowner’s insurance was taken out through the bank when you obtained a home loan, and the premium is automatically deducted from your account, you need to make sure yourself that the property is insured for the correct amount and that the premium is adjusted accordingly.”
Schultheiss says the second type of property-related insurance it is advisable to have is a life insurance policy that will pay out the outstanding home loan amount if the borrower dies or becomes disabled.
“This is called credit life insurance, which is intended to cover the risks of a specific debt. As you pay off the home loan and the debt reduces, the amount of cover offered by the policy also drops year by year, until you don’t need it any more.
“However if you die without such insurance before your home loan is completely repaid, it will be up to your family to settle your debts at a time when they are also faced with the expenses associated with your funeral and winding up your estate. They may not be able to afford this and could thus lose their home.
“Alternatively if you are disabled and can no longer work, this insurance will at least free you and your family from the worry of still having to repay the home loan or risk having the property repossessed. In short, no-one who has debts to service should be without credit life insurance.”

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