Make sure there’s no gap in your home insurance

You probably check on your car and household contents insurance at least once a year, but what about the policy covering damage to your home or its complete loss in the event of a fire, flood or other catastrophe?
If this has not been adjusted as the value of your home increased, you will most likely be underinsured, which means that any claim you make will only be partially paid out, and that if you lose your home to disaster, you may only be able to replace it with a much lesser property – although you will still have to pay off the home loan on the original home.
“With household budgets having been under severe strain for the past couple of years most people have sought to reduce their insurance premiums, not increase them,” says Hano Jacobs, CEO of the Realty 1 International Property Group. “And with property values having moved slowly during this time, it has simply not occurred to many homeowners that they may be at risk.”
However, he says, even small increases in value can make a big difference over time, as revealed recently in The Economist, which calculated that SA house prices had risen by an average of 456% over the past 13 years.
“So if you bought a home a few years ago for R500 000, say, the cost of replacing that property at today’s prices could easily have doubled and re-doubled to more than R2-million, taking into account the cost of demolition and clearing and professional fees as well as today’s higher building and finishing costs.”
Consequently, you really need to be sure you are adequately insured - and despite the fact that householder’s insurance is usually linked to a home loan account, it is your responsibility to check that the value of your property is accurately reflected in that policy and that you are paying the right premium. 
Says Jacobs: “When you bought the property and took out a home loan, your bank would most likely have insisted that you insured the home for what you paid, which, theoretically at least, was its replacement value at the time of purchase. The bank may also have adjusted the insurance and premium since then, but it may not know about improvements you’ve made to your home that would increase the replacement cost.
“It may also have applied a standard rate of increase, which would be insufficient if your home is in an area that has performed better than average. In short, in the absence of an individual valuation, your home could well be insured for far less than current replacement cost.
“Most certainly, it is well worth checking, before you find yourself having to cover the ‘gap’ between the insurance payout and the replacement cost, or having to pay off a loan on a home you no longer have.”
Issued by
Realty 1 International Property Group

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