South Africans are increasingly opting to live in large security estates because of safety, lifestyle and affordability factors.
Despite these benefits, the lines of responsibility when it comes to insurance matters and damages claims are often blurred, said Jonathan Kohler, founder and CEO of Landsdowne Properties.
Landsdowne is one of SA’s largest managing agents, with more than 35,000 apartments and free-standing clusters under management nationwide.
Kohler said with annual insurance premium increases, homeowners would do well to familiarise themselves with their rights and responsibilities when it comes to buildings and personal insurance.
He said in an estate, owners of full-title homes are responsible for their own building insurance, whereas in a sectional title, owners will pay proportionately towards building insurance as part of their monthly levy.
“For sectional title apartments, building insurance includes any damage to the outside part of an apartment, but inside damage would be for the homeowner’s personal account,” said Kohler.
Generally, the homeowners’ association covers common property or the body corporate’s building insurance. Damage to individual property originating from defects in the common property, such as from insufficient rainwater drainage, will also be for the body corporate’s account.
Kohler said sectional title estates with high claims ratios could be subjected to premium increases and this is communicated to homeowners through the board of trustees who represent homeowners’ interests.
Policy or premium changes are generally tabled for discussion and approval at the homeowners’ AGM. Homeowners will do well to attend these meetings to familiarise themselves with the financial position of their estate as well as any changes or levy increases.
Kohler said reputable managing agents will push back against premium increases from insurers, using their aggregated buying power to negotiate market-related rates.
He said often homeowners are over- or underinsured. Therefore, trustees should ensure that sectional title estates are evaluated regularly to determine the prevailing replacement cost.
For example, valuation for building insurance should be based on the construction cost to rebuild the existing structure — not on the sale or market value of the property. Municipal valuations can serve as a benchmark, depending on how accurate they are relative to the node, however, insurers rely more on replacement value — that is, the building cost per square metre when considering paying for claims.
Additionally, it is important to differentiate between building and home content insurance. Home contents refer to movable property, while building insurance and personal or short-term insurance are generally separated into different policies.
While financiers will generally require homeowners to have building cover on their bonded property, it remains the individual homeowner’s responsibility to take out home content insurance based on their personal needs.
Valuations on home content insurance should be conducted regularly to reflect the replacement costs of movable goods.
Kohler said one way in which individuals can lower their building insurance premiums is saving on short-term or household content insurance.
“Homeowners need to provide their insurance company with detailed information on risk mitigating factors such as 24/7 security, an electrified perimeter and access control.”
Most estates allow an alarm in the apartment, a safety gate at the front door and burglar proofing, especially for ground floor apartments. In addition, cars parked in a basement, lock-up garage or even under a carport will likely attract a lower insurance premium due to the lower risk factors, he said.
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