PROPERTY INSURANCE

OWNING a property comes with many perks, but it also comes with great responsibility. Break-ins, storms and fire are just some of the unforeseeable events that a property owner may have to deal with. If they have insured their property then it won’t be stressful, but if not, they will bear the costs.

This is why it is important to have insurance from the moment you take ownership of a property.

Property insurance protects against certain incidents that may occur in your property, so Natasha Kawulesar advises that “it is essential to ensure your property immediately from ownership”.

“One will never know when their property will be damaged, therefore property insurance should be considered immediately. If not, one risks facing an unnecessary financial burden.

“Insurance is there to alleviate some of this financial burden and assist in getting your home and your life back to normal,” the Outsurance head of client relations explains.

Natasha says there are three types of property insurance coverage:

◗ replacement cost

◗ actual cash value

◗ extended replacement costs Replacement cost covers the cost of repairing or replacing property at the same or equal value, while actual cash value cover pays the owner or renter the replacement cost minus depreciation.

But these differ depending on which financial service company one opts for.

The most recommended common cover is comprehensive, she says.

“A comprehensive buildings cover insures your home against a range of unforeseen events that you may not have budgeted for, such as acts of nature (storm, flood, hail), power surge, bursting of geysers and pipes, and theft, amongst others.”

There are also other limited types of cover that may insure one’s property

for the events mentioned above, excluding theft. But, due to the rising crime rates, it is not advised that one excludes theft cover.

Most individuals avoid anything that has to do with insurance due to the scepticism that comes with claiming, yet it can be simple, says Natasha. “Some claims, such as a geyser claim, may be logged and completed online using an app or client portal. For those clients who prefer speaking to someone directly, there are claims advisors who are ready to assist and the claim may be submitted telephonically.”

Insurance, however, does not cover your building for all damages, it depends on the cover. “Buildings, as with cars, need to be maintained. Damage that occurs over a period of time or is due to a lack of maintenance is not covered by insurance,” she warns. “Insurance is there for those sudden, unforeseen events. It is thus important to ensure your property is well maintained from the roof to the bottom.”

A GLOSSARY FOR NEWBIES

“The reduction of interest rates to historical lows (last year) resulted in a rise in the number of applications and approvals,” says Mfundo Mabaso, FNB Home Finance Growth Head.

“We saw more first-time home buyers and younger buyers enter the market as a result of the low interest rate.”

Credit profile, repo rate, bonds . . . When you buy your first property, the paperwork and jargon comes at you thick and fast and, unless you have a lawyer or real estate agent patient enough to decode it all for you, it feels like you’ve landed in country where people speak a new language.

For the property buying newbies, here’s a glossary of both financial and legal terms you’ll come across during the home purchasing process.

UNDERSTANDING THE FINANCIAL & LEGAL LINGO

Mortgage

A legal agreement between you and a bank, credit provider or building society for them to lend you money with interest in exchange for keeping the title deed of your property as the debtor in their possession as security until full payment of the debt.

Repo rate

The rate at which the central bank of a country, for example, the South African

Reserve Bank, lends money to commercial banks in the event of the short-fall funds. It is used by the monetary authorities to control inflation.

Access bond

The type of home loan that allows borrowers who have paid extra money into their bond to withdraw the extra money should they need to. An access bond allows the homeowners to pay any surplus funds they have into their home loan account.

Credit profile

This is a snapshot of your financial history, which includes your credit score – the rating given to you based on the number of credit agreements you have, your payments history and other factors.

Estate agent’s commission

These are payments made directly to real estate practitioners for services rendered in the sale or purchase of property.

Transfer duty

Refers to a tax levied on the value of any property acquired by any person in a way of transactions.

Transfer fees

For each transaction of the transfer of property, a fee is payable to the attorney during the process. In other words, these are the fees paid to a transferring attorney, appointed by a property seller to transfer ownership to the buyer.

Pro forma costs

This refers to the costs you pay the transfer attorneys for their fees, including deed’s offices searches, postage and petties.

Rates clearance certificate

This is the certificate issued by the relevant local authority on application by the conveyancer to transfer a property. It certifies that there is no current outstanding debt due by the seller on the property.

Bond costs

They are a once- off fee that you pay before the bond is registered. The bank hires a conveyancing attorney to register your bond after the home loan is granted, the registration process usually takes six to eight weeks.