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Is your home and property adequately insured?

Friday, 08 October 2010 12:07
Your insurer adjusts your home insurance and household insurance premiums every year to cater for increased costs of replacing or repairing your possessions. While this amount may be sufficient for lower cost items in the home (for contents insurance), the increase might not be enough to cover the increase in price it will take to repair your home.

Covering your property and the buildings on it, your home insurance policy is calculated according to the cost it will take to rebuild your home in the event that it is completely destroyed, whether it be by natural disaster or fire. This amount will change every year as property values change and inflation pushes up prices of buildings materials. Although you bought your home 20 years ago for R400,000, it’s worth more today.

What to look for in your policy
The total cost of the cover must not be related to the depreciated replacement value (that is the cost to replace the house at the time you bought it). Calculate how much it will cost to rebuild your house; that should be the extent of your policy. Expenses you should take into account:

  • demolition costs (you made need this especially for a partly destroyed house)
  • engineering costs
  • outstanding mortgage amount
  • any additions/ renovations you’ve done

Also make sure you note your policy’s exclusions. There might be something in there that you would like to include, such as flood or earthquake insurance. Also make sure that your home insurance corresponds to your household contents insurance. For example, you may have geyser insurance covered under your home insurance, but the damage it causes to the movable items in the home may not be covered in the contents insurance policy.
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