Insurance premiums are set to rise. Picture: Independent Newspapers.
By: Jonathan Kohler
Gauteng is entering the rainy season, which often coincides with hail and thunderstorms. Currently, insurers are still counting the cost of a devastating hailstorm that hit parts of Gauteng earlier this week.
In KwaZulu-Natal, last year’s deluge reportedly cost insurers more than R17 billion in claims, whilst the full extent of damage to infrastructure in the Western Cape is still being assessed, following what could be the province’s worst flood in 100 years.
South Africans are increasingly opting to live in large security estates because of safety, lifestyle, and affordability factors. Notwithstanding these benefits, the lines of responsibility when it comes to insurance matters and damages claims are often blurred.
With insurance premium increases looming, homeowners will do well to familiarise themselves with their rights and responsibilities when it comes to building and personal insurance.
Who’s responsible for what?
Owners of full-title homes in an estate are responsible for their own building insurance, whilst sectional title owners will pay proportionately towards building insurance as part of their monthly levy. For sectional title apartments, building insurance includes any damage to the outside part of an apartment, but inside damage would be for the homeowner’s personal account.
Common property is generally covered by the homeowner's association or body corporate’s building insurance.
Damage to individual property originating from defects in the common property, such as from insufficient rainwater drainage, will be for the body corporate’s account.
The claims process for sectional title owners Homeowners need to report damage to the Estate Manager or managing agent, who will assess whether the claim is covered by the body corporate’s insurance.
Once this has been established, the Estate Manager will log a claim with the insurance company, who will send out an assessor to inspect the damage, and once approved, the claim will be paid out or repairs affected.
Attend your estate’s annual general meeting sectional title estates with high claims ratios could be subjected to premium increases. In this instance, the insurance company will inform the broker of any changes to the insurance policy or premium increases. The broker, in turn, will inform the board of trustees, whose obligation it is to inform the owners.
Policy or premium changes are generally tabled for discussion and approval at the homeowners’ annual general meeting. It is therefore critically important for homeowners to allocate the time required to attend these meetings to ensure that they are familiar with the financial position of their estate as well as any changes or levy increases that may impact them.
A good managing agent with scale in the market will push back against premium increases from insurers, using their aggregated buying power to negotiate market-related rates.
How do homeowners avoid being over- or underinsured?
Trustees should ensure that sectional title estates are evaluated regularly to determine the prevailing replacement cost. On building insurance, it is very important that the valuation is based on the construction cost to rebuild the current structure – not on the sales value/market value of the property. Municipal valuations can serve as a benchmark, depending on how accurate they are relative to the node, however, insurers rely more on replacement value (building cost per square meter) when considering a payout.
Does building insurance cover home contents as well?
It is important to differentiate between building and home content insurance. Home contents can be defined as all moveable property (for example, if you had to turn your house upside down and shake it – everything that falls out would be considered moveable property) and are not included in the building insurance.
Building insurance and personal or short-term insurance are generally separated into different policies. Whilst financiers will generally require homeowners to have building cover on their bonded property, it’s the individual homeowner’s responsibility to take out home content insurance based on their personal needs.
Valuations on home content insurance, just like car insurance should also be done at regular intervals to reflect the replacement costs of moveable property and what the insured items are worth.
How to reduce your insurance premiums?
Although individuals do not have many options when it comes to lowering their building insurance premiums, they could potentially save a lot on short-term or household content insurance.
Residents living in secure sectional title estates could potentially save significantly by providing their insurance company with as much detail as possible on risk-mitigating factors. This includes whether the estate has 24-hour security, an electrified perimeter, and access control.
Most estates will allow an alarm in the apartment, a safety gate at the front door, and burglar-proofing, especially for ground-floor apartments. In addition, cars parked in a basement, lock-up garage, or even under a carport will likely attract a lower insurance premium due to the lower risk factors.
Large managing agents like Landsdowne are increasingly using big data to negotiate lower premiums for individual residents in the estates they manage, given their ability to provide insurers with details on individual payment track records, proof of employment, and credit history. In addition, they can provide information on the average LSM of residents, the estate’s security features, and whether cars are parked under shade cloth or in the basement.
Jonathan Kohler is the founder and CEO of Landsdowne Properties.
* Jonathan Kohler is the founder and CEO of Landsdowne Properties.
PERSONAL FINANCE