Protecting your investment with insurance

Your home is likely to be one of the most valuable assets you will own. While you put a lot of time, effort and money into making it the ideal home, it is equally important to keep yourself informed on how well this investment is protected.

Living in an estate, your property is covered by the sectional title insurance the body corporate has taken out on the development. However, it is still your responsibility as a property owner to ensure that your unit is adequately insured. This means you have to understand the extent of your insurance cover and personal liability to ensure that you are protected against any costly expenses as a result of an unforeseen misfortune.

The body corporate of your residential housing complex is required by law to take out insurance for the physical structure of your home. It is a requirement stipulated in the Sectional Titles Act.

Section 37 (Section 1 of the new Act) requires that the trustees:

• insure the building/s and keep it/them insured to the replacement value thereof against fire and other such risks as may be prescribed
• insure against such other risks as the owners may by special resolution determine.

Here are four important things to keep in mind about protecting your investment for some added peace of mind:

Know exactly what you are covered for

It is important to know what it is exactly you are covered for, as well as the extent of your insurance cover. Your sectional title insurance usually only covers the ‘brick and mortar’ parts of the residential sections and common property for their full replacement value in the event of damage or destruction from things like fire, flooding, earthquakes, burst pipes and rioting. It does not cover the contents of your home (major appliances, furniture, decor pieces, etc.) or any of your personal belongings (jewellery and clothes, etc.), even if these are lost or damaged due to one of the ‘insured events’ covered by the sectional title insurance policy. You and/or your tenants need to take out your own, individual insurance policies to cover such items.

Ensure that you have enough cover

Check that your unit is insured for the correct replacement amount – particularly if you have renovated or added value in some way to the unit – as the extra value might not be covered. The usual practice is that the body corporate covers the cost of insuring a standard unit’s participation quota, but any additional cover needed is for the unit owner’s private account.

Insured values on sectional title schemes should be updated regularly to be sure that the insurance policy keeps up to date with the market-related replacement value.
With regards to adequately insuring your home contents, you have to compile an inventory, and estimate the replacement costs for each item. List every item in your home and garage, when you bought it, its original cost and its estimated value.

It also helps to have photographs of your possessions. Keep one copy in a fireproof safe at home or in a safety deposit box. This can be time-consuming to do the first time around, but is reasonably easy to update on an annual basis. However, if you ever need to claim, the inventory will make the process easier for you.

Ensure that the policy is regularly updated

Insured values on sectional title schemes should be updated regularly to ensure that the insurance policy keeps up to date with the market-related replacement value.
As per the Sectional Title Act, each year the trustees of sectional title schemes should re-assess the insurance taken out for their schemes, and table this at the annual general meeting (AGM). As a property owner, it is important that you attend these AGMs so that you know whether the insurance cover on your building is in place, and is appropriate and/or adequate.

It is also important to let your body corporate know what improvements or additions you have made to your home so that they can inform the insurer. This way you avoid being underinsured for them.

As for home contents insurance, clients often forget to inform insurers about changed circumstances, and accumulation of new possessions. Unfortunately they only realise the impact of this when they have to claim. It is critically important to update your policy annually, to ensure that any new items are accounted for and covered.

Get an expert on your side

Insurance, let alone sectional title insurance, is not an easy topic for anyone. It is advisable to consult a property valuer and possibly a managing agent or an insurance broker specialising in this field, to establish the cover needed.

The same applies for home contents insurance. If you are not sure about what it is you are being quoted on, or are unsure about any aspect of your cover, get an expert to help you. Brokers are a tremendous source of information and advice, and can assist you with a myriad things from helping you update your inventory to helping you with the entire process of lodging a claim with your insurer.

Santam is an authorised financial service provider (licence number 3416)