Property: Ensurance that you understand Insurance

There seems to be an incredible amount of confusion about insurance and what each type of insurance covers. This article seems to clarify what is typically covered under each policy and who typically pays for it. Whilst some of the below may not seem like it is directly linked to property it is important to note that since property is probably the single biggest expense or debt that the normal working class will take on in their lives, the inability to pay back such debt or meet ones’ loan obligations can very quickly result in properties being re-possessed etc. For this reason we have included many of these fringe-insurances which may at the start seem to be unrelated:

1. Home Content Insurance

Home contents are usually insured by the person that owns it. In furnished holiday houses for instance it would cover all the contents of the house at the cost of the landlord BUT will exclude the personal belongings of those temporarily occupying the space. In the case of a permanent rental of an unfurnished residence the tenant would have to pay to have their own belongings insured. The items that are covered here are only the movable items including non-fitted furniture, curtains, loose rugs and all the things that would typically move out of the premises if it is sold or if the occupant moves to a different home. This insurance is usually relatively cheap and can cover a wide variety of risks including theft, fraud, fire, accidental damage and resulting damage. The cost is usually determined by the location of the items being insured, the security available at said location, the assumed/known risk at the location (for instance known frequency of break-ins) and the value of the items insured.

2. All Risks Cover

All Risks is usually a sub-section of Home Content Insurance Policies and covers all those items that move in and out of a specific property or location on a frequent basis. This would cover handbags, regularly worn watches and jewellery, laptops, tablets, mobile phones, cameras, video cameras and other equipment such as tools or musical instruments etc. If one has a business that operates by going out to customers it typically includes everything that moves with you to perform the duties/services to your customers incl. tools, projectors, laptops and the likes.  Some policies include a blanket cover amount which would for instance mean that in addition to covering the specific high value items specified for all risks cover the insurance would also cover a specific amount (say R10000) for items not specified such as cosmetics, wallets, ID’s and other documents that have not specifically been listed and identified with serial numbers etc. All risks insurance is usually substantially more expensive than normal household insurance and is for the account of the person the insured items belongs to.

3. Homeowners Insurance (Structure Cover)

As implied by the name this insurance is taken by the owner of the structure and covers everything that is permanently found at the premises. This covers the structure of the facility, plumbing, electrical, roofing, glazing as well as fixtures such as blinds and curtain rails, appliances such as fitted stoves, ovens and fridges and facilities such as intercoms, gate motors, alarm systems and electric fences. Banks usually expect bond holders to have comprehensive homeowners insurance over any property for the duration of any loan or bond taken where the property serves as security. This is usually paid for by the owner of the property but contrary to popular belief it is NOT a requirement to take out such insurance with the financing institution who finances the purchase of the property. In share block and sectional title schemes it is a fiduciary requirement of the trustees to jointly insure the structure of the entire complex, block or building from the levies collected for the benefit of all those owning property there. Common property would be covered under the same policy and paid for jointly by the owners of the individual units the cost being split by PQ (Participation Quota).

4. Professional Liability Cover

This is cover for resulting damage or loss of income that you may be held liable for in the performance of your normal professional duties or supply of your service or facility. This would for instance include amongst others if a roof falls down on a tenant and they are hurt – covering their medical bills or loss of income. This would only come into play if they can prove that the roof caving in on them was due to the landlords’ negligence or lack of maintenance or the like. This insurance is usually very cheap by comparison and multiple millions worth of cover can be added to normal insurance policies for just a few rand.

5. Added benefits – Added Services

Not strictly speaking a kind of insurance many insurance companies tag on additional services to their insurance policies, many times “free of charge”. As we all know nothing in life is for free but that is beside the point. These additional services includes things like a courtesy car in the case of a vehicle, locksmith, electrician or plumbing services in the case of homeowners insurance or even access to legal or medical advisory services free of charge for home content or professional liability cover.  This is paid for by the same person/entity in whose name the parent policy is taken.

6. Residential Rental Insurance

Quite a unique product Residential Rental Insurance assists landlords by covering the income they receive from renting out properties and taking care of the legal costs should a tenant not keep to their side of the deal. There are different structures by which this is done and the terms may vary widely from one service provider to the next. This is usually for the account of the landlord although some service providers actually include the premium in the rental collected from the tenant monthly. It boils down to the same thing though as the landlord will receive less money monthly than what the tenant pays, the difference being the premium. This essentially means that regardless of when/how the money is taken it is paid for by the landlord.

7. Rental Protection

Rental Protection approaches the above problem from the other side in the sense that a tenant is safeguarded should they be retrenched or lose their job for a period of time. In this case the insurance kicks in on certain events which prevents the tenant from meeting their obligations. The tenant knows that they won’t simply be evicted as the insurance would cover their rental for a period of time allowing them the opportunity to get back on their feet. This is usually subscribed to and paid for by the tenant but is sadly even lesser known than the Residential Rental Insurance listed above.

8. Life Cover

This is also called assurance by some but refers to the same thing. Again some financing houses insist in the loan taker/bond holder taking out this type of insurance. It will pay out a set amount in the event of death of the bond holder and is intended to essentially settle the bond/facility over the property. This would allow the spouse and children of the bond holder to remain in their home without worrying about where the money for the monthly payments would come from. Regardless of the requirement of the financing house it is a good idea to take out this kind of insurance to cover the outstanding debts one has plus a further 20 to 30% of the total nett value of all assets held in your name. Families have been known to lose homes because of estate duties and executors fees that are easily overlooked. The best is to hold as little assets in one’s personal name as possible in order to prevent the freezing of assets inside the estate and payment of exorbitant duties upon death. This policy could be paid for by anyone but is in most cases taken out and paid for by the life insured.

9. Dreaded Disease & Disability

Dreaded Disease and Disability cover is usually taken to either pay a lump sum or replace a substantial portion of one’s salary (usually up to 75%) or a combination of these should you suffer a disability within your working years. It provides cover against various disabilities, stroke, heart attack, cancer and a variety of other disabling and/or terminal diseases. In some cases it is combined with life insurance and part of the same facility but it could just as easily be taken out independently. It is usually paid for by the life insured but some companies offer it as a fringe benefit to those they employ.

10. UIF (Unemployment Insurance)

UIF is a statutory insurance taken out by the state and paid for from the salaries of those that are employed. It is a statutory deduction that is taken off your salary and should be indicated on your payslip. This entitles anyone that has been contributing UIF to receive a portion of their salary for a number of months after they have been retrenched or whilst they are on maternity leave etc. It does not cover you if you have resigned out of own free will.

11. Unemployment Cover

Some people don’t trust the state (and rightfully so) as UIF’s reach is very limited and would only pay for 4 to 6 months typically reducing payments monthly as it progresses. For this reason they take out additional insurances to cover a portion of their salary for any period they may not work due to a variety of different causes such as temporary disability, being medically boarded etc. This insurance is there to help one to stick to your financial obligations regardless of whether you are actively receiving an income or not.

12. Buy-and-Sell Insurance

When operating a business (property or other) with partners it is sometimes wise to obtain insurance over each other’s lives. This means that each partner would have insurance over the lives of the other partners in his business, so that should one partner die, they would receive enough money from the insurance to buy out the deceased partner’s share from the company. This way the estate would have no claim to the shares in  the company and the remaining partners will not require the permission of the estate/executor to keep on operating the business normally. 

13. Key Man Insurance

This insurance again for businesses (property or otherwise) deals with the fact that there might be an individual whose death would affect the company badly. This key person would typically be doing things that only they can do or which is difficult to hand over to another person or where resources that can perform those duties are extremely rare and could cause difficulty in replacing them in the event of their death. As such the insurance pays out an amount (typically 7 times or less the annual salary of the person) in order to facilitate replacement of the individual and keep the company running with the assistance of consultants or other methodologies that may come at a premium. Perceived losses in business could also be covered from it. 

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