Why you need homeowner's insurance to own property
Category News
There's no doubt that your home will be the largest financial asset you'll ever own, which is why homeowner's insurance is imperative. To help you better understand why you need homeowner's insurance to purchase property, below are a few key aspects you should understand.
What is homeowner's insurance and why do you need it?
Homeowner's insurance is a policy that will pay out against claims for damages or theft that occur within the insured property. Most financial lending institutions require homeowners to have such a policy in place as it protects their interests in providing you with home finance. That's why in most cases, the bank through which you acquired your home finance will also arrange for homeowner's insurance on your behalf. The monthly premium can then be debited to the home loan account and paid along with your monthly bond repayments. However, if you'd prefer, you can take out home insurance yourself - provided you supply the bank with proof that the home is insured on an annual basis.
What your homeowner's insurance should cover
For comprehensive cover, you will want a policy that will cover the property, along with all buildings on it, such as a free-standing garage, a swimming pool, the driveway, all walls, and the borehole pumps. To avoid being paid out less than what the items are worth, be sure to check that all items are insured for the full, current replacement value; you could arrange for a qualified valuer to come to your home to assess the replacement value of the various aspects of your property.
What won't be covered by homeowner's insurance
While all features of the home will be covered, homeowner's insurance does not cover any of your personal belongings, such as your furniture, jewellery, clothing, or vehicle. These items will be insured under your household contents insurance and car insurance. Additionally, your policy doesn't cover the balance of your home loan should you pass away. Something like this would fall under a home loan protection plan, which ensures the bond is taken care of in this event.
Understand insurance terminology
There are certain insurance terminologies that you ought to be aware of, such as:
- Overinsured
- means that the homeowner's insurance is more than the replacement value of the property. You want to avoid this because the insurance company will only pay out the replacement value, so you'll be paying a higher-than-necessary premium.
- Underinsured
- means there's a shortfall between the value of the property and the amount insured. This means you'll have to pay the shortfall amount out of pocket.
- Insurance to value
- means that the insurance cover equals the replacement value. This would be your ideal policy.
- Bonus Fact:
If the property is within a sectional title scheme, the body corporate will be governed by the Sectional Title Act, which states that all buildings must be insured for their correct replacement value.
Have a clear understanding of your policy
Remember to exercise due diligence by researching several policies and providers. Having a clear understanding of your homeowner's insurance policy will allow you to feel confident about your insurance.
Still searching for a home to insure?
Homeowner's insurance protects your most precious asset and ensures that you'll be able to afford to replace the roof over your head should disaster strike. If you're still searching for your dream home, reach out to your local real estate expert who can provide you with all the information and guidance you may need before embarking on your home buying journey.
Author: Remax Sa
