Buying your first home? Here are 4 important insurance tips to remember

If you are buying your first home, insurance is one of the important things to remember when you make this biggest investment of your life.

Figuring out what kind of insurance you need can be a bit overwhelming, but these top tips can help you remember what to do.

There are so many things to consider before signing on the dotted line: home loans, transfer duties, bond registration and of course: insurance, Karen Rimmer, head of distribution at PSG Insure, says.

She put together her four top tips to help you on your journey. You have to disclose all relevant details, remember to insure the contents of your home, understand your responsibilities as a policy holder and talk to your adviser if anything changes.

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Disclose all relevant details to your insurer

The type of property you buy will impact your need for insurance cover, Rimmer says. The three main types of residential property in South Africa are freehold, sectional title and property within an estate.

It is important to know which kind of property you buy because this will determine the Insurance policies you must get that includes specific clauses for the nature of the property.

“For example, with freehold or freestanding properties, mortgage providers usually require home buyers to take out insurance that covers the physical structure of the house.”

However, if you buy a sectional title property or an apartment in a housing complex, the body corporate is legally required to insure the physical structure of your home and include the monthly premium as part of payable levies.

Rimmer says what you must remember is that if you bought an apartment to do renovations that will change the structure of the unit, you will have to get approval from the body corporate because it has to let the insurer know.

In the same vein, you have to let your insurer know if you do renovations to your freestanding home or add to it to ensure your cover is adjusted accordingly.

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Remember your home contents

“Most first-time home buyers know about the kind of insurance that covers you in case of a major incident like a fire, burst geyser or the collapse of a part of the structure. While these possibilities pose very real risks, they are only one half of the picture.”

Rimmer says building insurance, which covers the structure of the home, does not automatically include the contents such as furniture, electrical appliances, clothes and other personal items.

“Remember that insurance is not a static concept. You have to review your policy regularly to ensure that any new items you buy still fall within the insured amount, or conversely, if you have scaled down, ensure that you are not over-insured.”

Sometimes it can even be more cost-effective to cover all your insurance needs under one policy, for example by combining your home contents and car insurance.

“However, the most important thing to remember is that insurance is designed to cover very specific risks, as agreed between you and the insurer, which brings us to the next point.”

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Understanding your responsibilities as the policyholder

Ensuring that you have adequate insurance is only one part of your personal risk management strategy. “When it comes to determining your premium, insurers consider a variety of factors, such as the level of crime in the neighbourhood, as well as what you have done as the homeowner to alleviate potential risks.”

Rimmer says installing home security systems, such as a burglar alarm, security cameras, electric fences or using the services of a private security company, could go a long way to reduce your premium.

“You also have to be aware that some of these elements may be prerequisites for taking out insurance, depending on how your policy is structured. It is important to note that, once you have agreed to the terms of your policy, it is your responsibility to ensure your home security systems are maintained and in working order to avoid a potential claim rejection or unnecessary complications.”

Therefore, it remains your responsibility to ensure the necessary maintenance is carried out regularly to avoid preventable damage to your property.

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Keep your adviser updated

Rimmer says when it comes to ensuring you have adequate cover for the biggest asset you will probably ever own, it can be beneficial to talk to your adviser regularly. Insuring your property will afford you peace of mind that your investment is secure, even when the unexpected happens.

“Each property is unique and you have to consider many things that can happen. Your insurance needs will also change over time as your insurable asset base increases and decreases over time. Advisers can only help guide you on issues such as how the claims process works, but they can also help to ensure your cover remains adequate as your personal circumstances and insurance needs change over the years.”