This is What Affects Your Building Insurance Premiums in South Africa

Becoming a homeowner comes with the added expense of taking up insurance. It is essential for your own financial protection incase of any unforeseen events.

If your house was financed by a lender, building insurance will most likely be mandatory.

In relation to your house, there are two types of insurance:

Building insurance – It may also go by the name home insurance. This is the insurance that covers the structure of your property against natural disasters like earthquakes, floods wind, lightning; fire etc. Depending on your insurer and what you are paying for, this type of insurance can also be extended to cover structures in and around your property, such as the fence, swimming pool, garages, driveways, and even permanent fixtures inside your house such as bath, sinks and fitted kitchen.

Home content insurance – This kind of insurance on the other hand covers moveable items inside your house such as furniture, home appliances clothing etc.

It is important to know the difference between the two so that you are completely aware of what the limits of your insurance plan are.

Read: Everything You Need To Know About Prepaid Electricity in South Africa

Factors that determine your building insurance premiums in South Africa

Insurance is one of those industries where no single size fits all. Everyone has to be assessed differently and what you pay could be vastly different from what your neighbour pays.

These are several factors that determine how much you pay for building insurance premiums.

1. Location of the building

Insurers always attach a high premium to buildings that are standing in the way of nature. This means that if you are in an area prone to flooding, earthquakes, forest fires, or storms, that may be put into consideration when determining what you will pay.

South Africa is lucky in this regard, in that huge natural disasters are few and far between across the country. However, in countries like the US or Japan, this is a big issue.

One of the things most building insurance plans cover is structural damage as a result of robbery. As we all know, thieves prefer not to knock on the front door. On their way in, they may do considerable damage on the fence, gate and doors.

Insurance companies love customers who don’t get robbed, and that’s why they might charge a higher premium if your house is in an area prone to robbery.

2. The condition of the building

Insurance companies will not want to take you on knowing you will be a liability. That’s why they have to look at the condition of your building before charging you an appropriate premium.

Some of the things they will be looking for are the age of the house, whether there are visible cracks, type of roof you have and its vulnerability to fire; age and condition of this roof etc.

In essence, if your house is in tip-top condition, you are likely to pay very little in premiums.

3. How secure is your house

Your insurer will be looking at how well protected the house is from burglary. This is very important in South Africa, owing to how common this is. As mentioned, burglars can leave substantial structural damage to your house, which is covered by your building insurance.

Features that may help reduce your premiums in this regard include: having a strong fence possibly with electric wire protection, bars on windows, metal doors, and alarm system; or simply being in a neighbourhood with adequate private security.

4. How close you are to a fire station

Fire is one of the most common reasons for insurance claims. Your insurance company will be more comfortable covering you if they are certain that your fire alarm will receive a quick response.

Distance between you and a fire station may go into determining the premiums you pay.

5. How close you are to a water body

This could be the ocean, lake or just a major river. Living near a water body comes with additional risks, such as flooding, or stronger than average winds. This may go into computing your premiums.

6. Your deductibles.

Other than the physical location or condition of your house, the insurer will also be looking at the amount of money or portion of claim that you have committed to paying out of pocket.

If you commit to taking some of the burden off the insurance company, they will reward you with lower premiums.

7. Your credit history

Insurance companies have access to your credit score and history. They know what your ability and willingness to pay looks like.

As a general rule, people with a poor credit score will be charged higher premiums than those with a good score. While the numbers are not clear in South Africa, in the US, having a poor credit score can see you pay double the premiums someone with an excellent score pays.

Read: Can Foreigners Buy and Own Property in South Africa?