Although house prices in certain areas have seen a decline, you still need to make sure your house insurance provides for replacement costs rather than property costs.
Debbie Donaldson of FNB Insurance Brokers says that, while house prices may be under pressure, building costs are increasing.
“Building industry inflation — involving both labour and materials — continues to rise steadily. This means that it costs more and more to rebuild or repair a property in the event of destruction or damage.”
So, when reviewing your insurance cover, ensure that the replacement value keeps up with the inflation costs.
Inflationary pressures in the construction industry are expected to continue for some time as construction projects across South Africa continue, with government expected to spend about R568-million in the next three years.
This is driving up the demand for skills and materials, keeping prices high. Donaldson says some financial institutions make periodic adjustments in the home replacement values of their mortgage-bond clients, but the underlying responsibility for maintaining an appropriate level of cover rests with the homeowner.
Donaldson recommends calling in a reputable broker and undertaking a thorough review — then making a mental note to do the same next year.