A SENSE of home ownership is one of the notable trends characterising the Zambian society in the recent past.
Although the nation still has a shortage of about three million housing units according to reports, there are many strides that are being made to enable people own houses, for example government through late President Michael Sata committed to recapitalise the Zambia National Building Society (ZNBS) to enable more citizens access mortgages.
People are no longer waiting to get their retirement package in order to own a house.
As a matter of fact, many jobs, especially in the private sector are contract based as opposed to pensionable ones.
With this social evolution many people make use of many options available in the market such as savings, loans, gratuities etc to secure some shelter.
A common talk of the town nowadays is that of buying plots, constructing or buying houses or farming; this is a positive development.
Financial institutions have been handy to avail funds to as many people as possible.
Although interest rates have remained relatively high in the region, a considerable number of people have been able to access mortgages.
I got one in 2013 at the interest rate of about 18 per cent.
The growing trend in home ownership has coincided with another faster evolution of vehicle ownership.
Nowadays vehicles are not viewed as luxuries but rather necessities.
So if I may ask which one is more important between a house and a vehicle? An intriguing question!
I bet the generic answer would be a house.
In terms of insurance which one do most people insure?
To this question the most likely answer is a vehicle. But is there any special reason?
Why shouldn’t one prioritise insurance of the most valuable asset of the two?
This is a conundrum I will try to unlock and justify the need for home insurance.
The underlying need to insure the vehicle is two-fold.
Firstly, it is a legal requirement by law while the second arises from an individual’s realisation to protect their asset.
The former reason is the driving factor of the pro-motor insurance we have.
Further even in terms of risk occurrence the likelihood of a motor accident is higher than that of a house.
Risk is generally a factor of two variables that is likelihood and severity.
In applying risk analysis to the two assets I can say motor accidents have both a higher likelihood and severity compared to houses.
The question then is how remote is this likelihood of a house getting damaged?
To answer this question we need to identify those risks that may cause damage to the house, which are fire, lightning, explosion, falling trees, impact by vehicles, earthquake and so on.
With this risk identification then we can ask ourselves a question such as how likely is fire gutting a house or how likely is vehicle impact damage to a house.
I will answer these questions with two practical examples.
The first one is on fire damage. A friend of mine in 2009 experienced what he termed a shock of his life.
He was staying at his parents place and one morning he reported for work only to be called in the afternoon that their house was ablaze.
The only items that survived from his personal belongings were the clothes that he was wearing.
By the time the fire brigade arrived at their house it was too little too late. Literally nothing was salvaged.
The most unfortunate thing for my friend was procrastination.
He had identified these risks and had even obtained a proposal form from an insurer to insure the house.
The next situation involved a vehicle at some famous T-junction in Ndola where two vehicles in a space of about a year rammed into this house. The location of the house was adjacent to a T-junction.
After the first incidence a barrier was erected to mitigate the risk of vehicles ramming into the house.
On the second occasion even with the barrier in place a Mercedes Benz around 03:00 hours in the morning was able to ‘fly’ over the barrier and penetrate through the wall facing the direction it came from to the amusement of all us who visited the place.
In both cases, although the likelihood of the risk occurring seemed remote the severity or extent of damage was huge.
This risk analysis in insurance terms is factored in when calculating premium which in technical terms must be commensurate to the risk.
Next week I will show you how affordable it is to insure a house.
Comments: webster@picz.co.zm or webster_tj@hotmail.com or on face book search for Insurance Talk-Zambia page or call/text 0977 857 055
[The Author is a Chartered Insurer with more than ten years industry experience]