You’ve bought a property and you want to insure it. Your bank is pressuring you to accept their insurance policy — should you?
You can — but remember that, according to the National Credit Act, you are free to choose a homeowner or building insurance provider. This does not have to be your bank or bond provider.
According to Melody Redman, general manager of Budget Insurance Brokers, banks tend to promote their own “insurer” because they generally own or are shareholders of that insurer. They have a vested interest. This is not to say their insurer is not the best, of course, but the consumer is always free to shop around.
The risk of any large investment is substantial, so you are within your rights to consider the matter from all angles and make an informed choice.
Remember that you can insure your home or building with the same company that insures your vehicle or the contents of your home.
Building cover should include insurance against fire (a friend’s house burnt to the ground last month — it happens), explosions, storms, floods, lightning strikes and any resultant damage, as well as ground movement including subsidence and landslip.
Redman offers these tips to help you when you shop around:
- Don’t under-insure your assets. If you’re under-insured, you’ll be paid out for only a proportion of the value covered. You will have to make up the difference between that and the full cost of restoring the house or building to its previous condition.
- The sum or value insured should make provision for the cost of rebuilding all the structures on the property (as though they were completely demolished). This amount should allow for any inflation occurring over the course of the insurance years and should also take into account any escalation in the costs of material and other construction costs.
- “Rethink your base insurance values at least every five years if the insurance company does the automatic increase, and every year if they don’t,” advises Redman.
The take-home message is that when insuring your most valuable asset, it never pays to under-insure.
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