Many South Africans are caught in the trap of paying thousands of rands unnecessarily for homeowner’s insurance. The building insurance of others lapses without their realising it. This could cause sudden financial ruin to people who saved regularly all their life.
Redeeming one’s mortgage bond after ten or twenty long years is a highlight in the life of every homeowner. It means more disposable cash, besides the delightful knowledge that one’s home is truly and completely one’s own after so many years. It is people over 50 in particular who fall in this privileged category, but who could easily fall prey to a situation that might even bankrupt them.
Amid the excitement and delight brought about by a redeemed bond, many people often forget to continue with their building insurance – also known as homeowner’s insurance. The Managing Director of IntegriSure, Arnold van der Linde, says it happens mostly when the building insurance is taken out at the financier of the purchase, known as the bondholder. “The building insurance premium is often conveniently added to the monthly bond instalment, and when the bond is redeemed, the instalment lapses – and often the building insurance as well.”
Van der Linde says usually the homeowner only realises it when something goes wrong. “It is a tremendous risk to own a home of which the building is uninsured. If the roof is blown off by a sudden gust, if torrential rain should cause a wall to collapse, lightning trigger off a fire or an earthquake result in serious cracks, it could spell financial disaster for an owner without building insurance,” he says.
Another problem, according to Van der Linde, is that most people who qualify for lifestyle discounts often pay too much unnecessarily for building insurance, because if such insurance forms part and parcel of their mortgage package deal with the bondholder, interest could possibly even be levied on it.
It is obvious, therefore, that it could be much more beneficial to have one’s building insurance arranged through a short-term insurance broker – not only because a considerable amount of money could probably be saved this way, but also and especially because it would eliminate the pitfall of lapsing building insurance when the bond is redeemed.
It has the additional advantage that the replacement value of the building can be evaluated annually when reviewing one’s insurance portfolio with the broker. That is little effort for much peace of mind. So the new world is, after all, a place where one can exercise one’s own options!