How is the insurance risk of your home calculated?
Covering your contents21st Jun 2022
If you’re in the market to buy a home, there are lots of other costs to consider than just the price of the property and the legal and banking fees that come with securing finance to purchase it.
Another big cost is insuring the items that are contained within the home and insuring the structure of the property itself. Insurance such as this can prove a lifesaver in the event of a break in or fire where a home can be reduced to ashes.
But how much can you expect to pay in premiums and how is this determined? Iain Massey, senior manager: broker enablement at Indwe Risk Services and Lwanda Lucwaba, technical underwriter for Santam offer their insight.
Estate Living (EL): How do financial services companies and insurance brokers gauge the risk profile of a home – do they look at postal codes? Or what else do they look at?
Iain Massey (IM): A wide range of risk factors are assessed, such as proximity to flood areas, security concerns, rural or urban areas, risk of fire spread, level of water supply for firefighting. Insurers have a detailed data base of the postal code areas and the loss history in each area.
Lwanda Lucwaba (LL): The following risk profile information are assessed by brokers and insurers: the location, flood and sea surge risk, subsidence and landslip, lightning, and thunderbolt propensity, as well as security measures.
EL: Is there any way consumers can access the risk information based on their post code to find out what they’re likely to pay?
IM: Consumers cannot access that database, as it is confidential information that each insurer holds based on their own client base. They will need to ask for pre-purchase quotations to determine which is the lowest premium they can afford. This is where a broker can assist with the obtaining of the quotations and give advice on which quotations are the best for the consumer’s unique circumstances.
EL: What does that mean if a residential estate is next to a poorer area or a high crime area? Does it have an impact on insurance premiums?
IM: The proximity of high crime areas will impact the level of premium, as theft is normally more prevalent in these areas.
EL: Do homes in residential estates pose less of a risk given the added security? If so, do they tend to pay less insurance for household contents theft?
IM: Yes, security in residential estates is better than in open suburbs, so premiums will be discounted due to a lower loss history.
LL: It is possible to get affordable cover, without compromising on quality.
EL: How can households reduce insurance premiums on their home content insurance?
LL: Additional measures such as burglar bars and an alarm system or living in a security complex all add up. These things could lower your premium considerably. Do a home inventory: The insured amount of your house contents should represent the new replacement value. If overly inflated, it would mean a higher premium – without any benefit at claims stage. Rather do it accurately: item by item, room by room, instead of guessing an amount. Higher excess always equals a lower premium: This is another way to save if you can put some money away in the event of a claim