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Homeowner’s, household and bond protection insurance explained
Three kinds of insurance matter when you own a home, and they cover different things. Homeowner’s insurance covers the building. Household insurance covers what is inside it. Bond protection insurance pays off, or helps pay, your bond if you die or can no longer work. Your bank will normally insist on the first, and the other two are your choice.
Homeowner’s insurance
This covers the structure of your home: walls, roof, fixed fittings such as built-in cupboards and the permanent parts of the property. It pays for damage from events such as fire, storms or a burst geyser, depending on your policy.
If you have a bond, the bank has a stake in the building, so it will usually require you to keep it insured for as long as the bond is registered. Your bond attorney or the bank will tell you when the policy must start, which is normally by the time the property is registered in your name. Arrange the quote early so that you are not rushed.
Check the insured amount. It should be the cost of rebuilding the home, not the price you paid. The two can be very different. If you insure for too little, the insurer may pay out only a part of a claim.
Sectional title
If you own a sectional title unit, the body corporate normally insures the building as a whole, and the cost sits inside your levy. Ask the body corporate for proof of cover and the details. You may still need your own policy for the contents and for fittings inside your unit that the scheme’s policy does not cover.
Household contents insurance
This covers your belongings: furniture, appliances, clothes and electronics. It can pay for theft, fire or water damage, depending on the policy. For valuable items such as jewellery, laptops, bicycles or art, you may need to list them separately and say what they are worth. If you do not, there may be a limit per item.
Read the exclusions. Policies often have conditions about security, such as burglar bars or an alarm, or about leaving a home unoccupied for a long time. A claim can be rejected if you did not meet a condition.
Bond protection insurance
This is a life and disability cover linked to your bond. If you die, or become unable to earn because of a disability or severe illness, the policy pays an amount towards the bond, according to its terms. The aim is that your family can keep the home without the debt.
The details differ widely. Ask what events are covered, whether the payout settles the whole bond or only part, and what happens to the cover as the balance falls. Compare it with any life cover you already have, so that you do not pay twice. A banker or bond originator may offer it, but you are not always obliged to take theirs. Ask whether you can buy cover elsewhere and compare the price.
Reading a policy before you buy
- Check what is excluded, and what you must do to keep the cover valid.
- Find the excess, which is the amount you pay yourself on each claim.
- Check how the insurer values a claim: replacement cost or current value.
- Ask what happens if you are renting out a room or running a business from home.
- Tell the insurer about changes, such as renovations, a new alarm or solar panels.
Get quotes from more than one insurer or broker. Compare like with like: the same insured amount, excess and extras.
What to do next
- Ask your bank or attorney when homeowner’s cover must be in place.
- Estimate the cost to rebuild the home, and ask the insurer for a quote at that value.
- Decide whether you need contents cover and bond protection, and list your valuables.
- Add the premiums to your monthly budget.
Premiums are part of your running costs, so include them when you use the affordability calculator. Read the monthly costs of owning a home for the rest of the budget, and the full cost of buying a home for the one-off costs.
This article is general information for South African readers, not legal, financial or tax advice. Rules and rates change, so check your own situation with an attorney, your bank or a tax practitioner. Our property calculators can help you work out the numbers.