YES you have read correctly; for as low as K290 you can insure your house. As promised last week today we will discuss how one can complete the purchasing of insurance for their house.
To arrive at how much a customer will pay insurers will need to know the value of the house, construction materials used, location inter alia.
First of all readers might be interested in knowing what constitutes a house in insurance.
A house in simple terms is the actual house (structure) in its literal context or a private residence including outdoor buildings, landlord’s permanent fixtures and fittings (those a tenant will not carry along when moving out of the house), fences, swimming pools, boreholes and water pumps, water tanks etc.
All this information like many other policies may be captured in a proposal form or its equivalent.
The crucial step we will discuss is the correct value of or in more technical terms sum insured; how do you arrive at the right sum insured?
The best way to arrive at the sum insured is understanding the basis of cover.
Unlike indemnity policies which cover an asset and at the time of loss will consider the age including wear and tear, reinstatement is best and usually used in house owners insurance.
It can simply be defined as the cost of demolishing and clearing away the existing structure and rebuilding it to the existing design in modern materials, using modern techniques, to a standard equal to the existing property and in accordance with current local and national laws.??In arriving at the reinstatement value you need to factor in the rebuilding costs from scratch until the house is complete.
You can do this by keeping a record all expenses you incur while building plus the cost of demolishing and clearing if there is a loss.
From my experience this may not be pragmatic.
You may need the services of a registered valuating firm to carry out a professional assessment of the rebuilding cost.
Up to a certain level insurers will not insist on a valuation report as they are alive to the cost associated with such a report.
However, if you are getting a mortgage or loan from the bank using your house as collateral a valuation report is usually mandatory.
Please note that a building should not be insured on market value because this value fluctuates depending on market forces.
Also paramount to note is that the value of the building tends to go p because rebuilding costs usually go up resulting from economic factors such as inflation.
Another key factor in the rating of house owners insurance is the location of the house.
A house located in a township without proper roads for example poses a higher than one in an area with better roads because in an event of a fire it is easier to get to the house by the fire brigade.
Further availability of fire brigade is another factor in rating home insurance.
Places where there are no fire brigade services the risk is higher.
The other key factor is the construction materials used although this is captured when valuating the house. Generically speaking a house with thatched roof has a higher risk than one with corrugated roofing sheets.
Similarly a house with substandard construction materials attracts a higher rating or insurers may refuse to cover it.
While I hope I have not lost you by now. Speaking as an empiricist rather than a rationalist all you need to do is to declare the current rebuilding cost either based on your estimation or as computed by a surveyor and the insurer will be good to give a rate and calculate the premium.
A rate per mille or a percentage is applied on the sum insured.
As a general guide the minimum rate approved by the regulator is 0.125 per cent of the sum insured.
There is a minimum premium which is currently K290 inclusive of Value Added Tax.
This means that for all houses which are K200, 000 or below the annual premium will be as low as K290 only.
When most people learn about how affordable it is to insure their houses they get stunned as the perceived price of house owners insurance is high.
It is my sincere hope that this discussion has demystified that house owners insurance is expensive.
To buy your house owners insurance please contact the insurer or broker of your choice to get your valuable asset insured at very affordable premiums.??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 10 years industry experience