If you apply for a Home Loan, the bank will insist that you insure the property

The reason for taking out insurance on your home is; if the building is damaged you would be left with no home and still owe the bank money. With insurance you can rebuild the home. Banks insist on insurance to protect you, the home owner and to protect their investment.

There are two types of insurance that a bank will require a property owner to take out if they are applying for a home loan: Homeowners Insurance and depending on your profile, they may require Life Insurance.

 

Homeowners Insurance (Building):

This insurance covers the structure of your home, the building and everything fixed to the property. In the event of a fire or damage due to other causes, the cost of the repairs or replacement of the building is covered. The amount of insurance will be the total rebuilding value, which the bank will determine.

The process of taking out insurance is done while you are applying for your home loan. The bank has to value the property to determine the amount of insurance require. You should insure the property for its total rebuilding value and no more. There is no benefit by over insuring the building. It is important to review your homeowners insurance every year to make sure that the cover is correct and take into account increases in building costs.

 

Life insurance:

The bank may require that you take out life cover. If you are the only breadwinner, in the event of you passing away, the home loan can be paid off. Your family can continue living in the home and will not be left with a debt they can’t afford to pay off.

The value of your life insurance can be more than you require to pay off the home loan, as your family will inherit the remainder.

 

In addition, there is a third insurance which you should consider, to cover your personal belongings.

Householder Insurance (Contents):

Your possessions in the home are not covered by the insurance of the buildings. All the loose items which can be carried away, should be insured separately. This is not required by the bank, but is for your protection, for the replacement of your property. An inventory of the contents of your home should be prepared. For insurance purposes, the replacement values of your contents are required, otherwise the insurer won’t pay the full value of your claim. Like your Homeowners insurance, you should review your Householders Insurance each year.

 

For further information on home security, contact:

Nick Bands – Southsure Brokers:

Tel.:  083 654 7449

E-mail.:  nick@southsure.co.za