How to Know if Your House is Underinsured

Most homeowners are underinsured and they don’t even realize it until it’s too late. 1 in 3 South Africans are underinsured without realizing it. What’s complicated and possibly terrible about being underinsured are the major financial and emotional implications that it will bring about in the event that any damage occurs to your home and you need to make a claim.

Types of House Insurance

House insurance is an insurance policy that you get that protects your home financially from any losses or disasters might occur. The types of insurance home owners can get include:

  • Home Insurance: this is also referred to as building insurance. It covers the building structure of a home from any damage that might occur due to theft, fire or natural disasters. It covers permanent fixtures in the home, like toilets and baths, but not appliances such as furniture and home appliances.
  • Home contents Insurance: this insurance policy protects the items that are in the home from any damage or loss that might occur. This can be caused by  damage from accidents, natural disasters, fires and theft. It covers items like curtains, cutlery and home appliances.

How to Insure Your House

When you decide to cover your home you must understand that house insurance quotes differ from person to person. House insurance also tends to cover different things so you need to contact an insurance agent who will help your regarding the details. Most things that are covered by house insurance include:

  • Intentional or malicious damage
  • Theft or burglary that cause damage to the home.
  • Loss or damage due to explosions, earthquakes, geyser or pipes bursting, flood, fire or lightning.

You also need to know the value of your home before you get house insurance. Most people assume the cover you get is based on your property’s market value, but it is actually based on the amount you would need to rebuild. You also can’t base it off the amount you paid for the house or the cost you incurred while building it. Using online house insurance calculators to get estimates can be useful, but there are special features that it won’t be able to take into account. These include the size of the land, whether the home is expensive, the special features on the property as well as the slopes that the land has.

You would then need estimates that are accurate for rebuilds, as well as professional fees to do so.This valuation can be done with the assistance of an insurer, builder or quantity surveyor. You can also reassess the sum to be increased each year as building costs are likely to increase regularly.

What Does it Mean if Your House is Underinsured

Underinsurance refers to having a replacement value that is higher than the insurance cover that you have. In the event that your property was damaged, or your items were stolen, you would need to pay for the remaining difference by yourself, even if you were not aware that you were underinsured.

There are plenty of reasons as to why people are underinsured; such as being negligent or choosing to be underinsured. When people are negligent, they tend to insure the house based on its market value and not the rebuilding costs.

Inflation also changes the costs, and it will affect the amount you have covered for your house. Inflation is taken into account when you take out your cover, but it is based on 10%. If you don’t update your house insurance policy regularly then you might actually be paying for half the cover that you actually need.

What Happens if The Property is Underinsured

The danger of being underinsured is that it could lead to major financial implications for you in a time when you are already stressed out. People don’t understand how much they could lose by being underinsured. They might not be able to afford to replace everything that they lose and in the worst case scenario, they might not be able to rebuild the home to maintain the standard that they have right now. At times they might not be able to rebuild at all.

To avoid underinsurance you can:

  1. Take out home contents insurance and do an inventory check each year of all your contents from the most expensive to the ‘cheapest’ based on what you feel will cost the most to replace.
  2. The replacement value should be updated regularly. Property tends to appreciate over time due to inflation rates. This is why you should review the cover amount you would need annually.
  3. When taking out home insurance, try to insure against all your items; not only on those things that you feel are more likely to be stolen during a break in. Get insurance for all accidents that can happen like floods and earthquakes because nature can be unpredictable.


As a homeowner, you need to consistently communicate with your insurer especially when you have made changes that might affect your house insurance policy. Ensure that you are receiving the right cover for your house because the last thing you want is to receive an unpleasant surprise when you need to make a claim.

See Home Contents Insurance Explained – 5 Main Things To Know.

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