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Risk assessment and the value of good advice

Whether you buy a home as a primary property or an investment property, it is a costly endeavour where the budget is often extended to the maximum.

At first there is the purchase price and the numerous associated fees. Then there are municipal services expenses as well as possible renovation costs to make the property your own. In sectional title, there is a body corporate levy plus an unforeseen special levy from time to time. In light of all this, the last thing the property owner wants are further unforeseen expenses.

Consider the case of a property owner purchase a unit in a well-established sectional title development. At the annual renewal of the insurance policy, the trustees agree to change insurer under the recommendations of the broker. The new insurer offers a better insurance policy with lower premiums that benefits all members of the body corporate.

Upon underwriting the risk the new insurer completes a risk inspection and identifies some areas of concern which require increased insurance risks in some sections of the property. As a result, the initial underwriting terms are amended to accommodate the revised risk profile and significant premium increases are introduced to the relevant sections.

Naturally, the relevant section owners raise immediate objections based on the fact that the previous insurer did not see the need to increase the risk category of their sections. They feel they are prejudiced in the change of insurer as their insurance costs increased.

When one considers property insurance, it is important that the property owner take advice from suitably qualified advisors to ensure all risks are properly underwritten. Similarly, when a prospective buyer is looking to buy a property, property insurance must not be overlooked when scrutinizing the property. It is wise to consult the financial records of the scheme before purchasing a sectional title property. In addition, it is also important to review the insurance policy and the claims history of the scheme as well of the insurance history of the unit for sale. We recommend that the buyer ask an advisor to review the information and advise on the existing insurance to ensure that all risks are adequately catered for.

Once the property is transferred, the new owner takes on the responsibility for his property including most past issues. The onus is on the new property owner to ensure adequate insurance. Comprehensive cover avoids a situation where the owner may find himself under-insured at claim stage. It is important to ask the right questions and to seek out the correct advice in advance. Trying to do so after a loss or damage will be too late and ultimately, too costly.


Author:  Bruce Gibson, Addsure

Contact Addsure – The Leaders in Sectional Title Insurance – for fit and proper advice from advisors who understand Sectional Title. Contact us in Johannesburg (011) 704-3858; Durban (031) 459-1795; Cape Town (021) 551-5069