Have you ever wondered how much it would cost you to rebuild your home if it were to be totally gutted by fire or washed by floods? It sounds as if it’s a simple question, but answering is fiendishly difficult. It is certainly a lot more than it used to be, but that fact alone won’t help you decide how much insurance you need.
How much is my insurance rebuilding cost?
Homeowners buying buildings cover must be aware of ‘rebuild costs’. This specific insurance terminology does not refer to the purchase price or the current value of the property, both of which include land values. Rebuild costs are usually lower than the current purchase price, but in some cases the reverse is true. To ensure you aren’t forced to build back worse, it is very important to obtain an accurate and timely cost of rebuilding your home.
What happens if my insurance rebuild cost is too low?
Declaring an adequate rebuild cost is especially important under standard homeowners’ buildings policies. Most insurance coverage includes an ‘average clause’ which can have a very costly impact if the insured has set the rebuild cost too low. It seems unfair: claims will be reduced by the percentage of the underinsurance. For example, if you bought R1, 000,000 to cover rebuilding costs, but the final price is R1, 500,000, you would be under-insured by 33%. Your total payment from the insurer would be R666,666, not R1, 000,000.
Have home rebuilding costs gone up?
Inflation is another factor – especially today. Your estimated rebuild costs have to keep pace. In South Africa rebuilding costs have increased hugely, especially for higher value properties. Driven by the pandemic, the fuel crisis, and snarl-ups in the global transportation and logistics sector, an old rebuilding cost of R5,000 per square metre may now be up to R15,000. With those numbers, it’s easy to find your claim is several hundred thousand rand short.
About Maksure Risk Solutions
Maksure Risk Solutions is an Afro-Global independent specialist insurance and reinsurance broker with business footprint in Africa, Asia, East & Western Europe, South America and the Caribbean. We provide innovative and tailor-made risk solutions in Insurance and Reinsurance as well as Risk Financing and Actuarial Consulting geared towards capital management and strengthening our client’s balance sheet. Maksure is also one of the major players in Captive Management (Establishment & Management) in South Africa, Mauritius, Bermuda and various other jurisdictions. We have access into the Lloyds of London with a deep understanding of African markets. Our global nature ensures that our clients access quality capacity as well as some of the world’s latest thinking and solutions