Home owners' insurance vital to peace of mind and financial security, says Alexander Swart Director.

Home owners' insurance has been defined by Private Property as a means of protecting homes from accidental loss or damage caused by fire, theft, breakdowns in the operating systems or natural disasters such as flooding or high winds. While it is acceptable to bond issuers to leave the goods in a home uninsured, they will never award a bond unless the home itself is fully insured.

Many home owners, says Rowan Alexander, Director of the Cape Town real estate agency Alexander Swart Property, resent the apparently high charges of home insurance. Quite often they only begin to appreciate the importance and value of insurance when for one reason or another they would like to claim but find that they are not entitled to do so.

Alexander himself has fairly recently experienced two cases which were not covered by insurance and in both instances he could blame only himself for not reading the policy conditions thoroughly. In the first case he found that his policy did not cover the ancillary, consequential damages caused by a leaking pipe. In the second case, he found that the serious damages caused by a tenant (amounting to around R180 000) were also not covered by his policy.

Alexander says that the best and most obvious tip he can give any home owner is to review and re-evaluate his property regularly, preferably once a year and if possible with the help of a broker not linked to any one company. It will often be found that a policy from a bond issuer, in most cases a bank, is not the best on the market. It may be more expensive than certain rival products and quite possibly, less comprehensive. If it is bank-linked it will probably include the insurance in the overall package, which means that the bond holder will pay interest on it. Furthermore, certain policies do not make allowance for the escalated value of the home with the result that in time it becomes hopelessly under-valued.

It is particularly important, says Alexander, to revalue not just the market value of the home but also its replacement cost and to do this properly it will be necessary to call in a professional:  replacement costs can escalate well ahead of market value. The replacement cost should include such items as the demolition of the existing buildings and the architect's fee for the new home.

Alexander also advises all home owners to "embrace" a preventative maintenance programme. Any home owner failing to maintain his property in good condition is not only steadily reducing its value but may find when he needs to submit a claim, the insurer may be able to avoid payment on the grounds that the problem has been caused by negligence on the owner's part; and may be fully justified in doing so.

In many policies, as he discovered, the consequential or ancillary costs of mishaps are not allowed for, especially when they affect another property. Many policies also do not make allowance for loss of rental income and a separate clause needs to be inserted in the policy to insure for this.

Alexander adds that it is also worth looking into the potential savings that can often be made by pooling all one's insurances into one all-embracing, comprehensive policy. This has been known to give an overall reduction in monthly payments of as much as 20%

In cases where the bond has been fully paid up and is linked to the bond issuer's loan, it quite often happens that the insurance also lapses without the home owner realising this. As a result, there have been a few tragic cases in SA history where a fully paid-up home has burned down or been damaged by storms but the owner has been unable to claim for the replacement or repairs. It is essential to keep policies alive and well for as long as a home is registered in your name. When selling a home care should be taken to ensure that it is insured up to the day that legal transfer is confirmed.

"Insurance," says Alexander, "is one of those financial burdens which we all find irksome but it is an absolute necessity. Adopting a negative attitude to it and trying to cut corners is a dangerous route to take and can have very serious consequences. Nevertheless there are ways in which one's outlay can be reduced without losing the full benefits of home insurance and are worth examining."

For further information, contact Rowan Alexander on 082 581 3116 or by email: rowan@asproperty.co.za