Knysna fires: Lessons for our home insurance

The probability of having your home completely destroyed by a fire is low, but it is one of those events that has the potential to completely destroy you financially. Despite this, the executive mayor of the Knysna Municipality, Eleanore Bouw-Spies, has reportedly said that more than 50% of the homes damaged by a wildfire last month, the majority of which were formal dwellings, were not insured.

There are also concerns that many residents may have had insurance, but were underinsured. People are often underinsured when it comes to their household contents, as well as for the value of the house itself. This can be particularly true if you have not reviewed your insurance in a long time as household contents will be worth more and constructing a new home will cost more.

The fire in Knysna destroyed about 600 homes, displacing more than 10 000 people.

It was initially estimated that the damage to property totalled R4 billion to R6 billion, but this figure may end up being much higher.

According to Standard Insurance Limited, the fires in Knysna, Plettenberg Bay and other small towns in the Western Cape that started on June 7, as well as storm damage in Cape Town on the same day, resulted in an initial estimate of R100 million in claims for the company.

Meanwhile, Alexander Forbes estimates its losses from the Knysna fires to be R46 million from the 65 claims reported to date.

At the time of writing, insurers were still adding up the costs and paying out claims, so the full extent of underinsurance is not known, but anecdotal evidence shows that many people simply cannot afford to rebuild and refurnish their homes.

If you’ve been affected by fire or a similar event, here’s what you can do to ensure you have the right cover:

1. Make sure you are covered for everything Michael van Niekerk, the CEO of ASP Fire, a protection solution provider, says that homeowners generally suffer a shortfall after disasters such as this because they don’t insure themselves adequately. He points out that household contents such as paintings, clothes and appliances can be worth as much in value as the house, so, when it’s time to make a claim, there’s no money left over to rebuild the home.

“There are demolition costs and architects fees – you’d have to get it all redesigned,” he says.

Lizette Erasmus, insurance expert at IntegriSure, adds that most policies include the rebuilding costs, but there are a few insurers that don’t include this and have it as an optional extra – so check your paperwork.

2. Look at the replacement cost Erasmus says that people are often underinsured because they may have old furniture, for example, and believe it is not worth much, so they don’t insure it. However, it’s key to insure items based on the replacement value, rather than how much you think something is worth.

3. Get cover for the extras Erasmus encourages households to consider insuring extras such as swimming pools and boundary walls because these can be expensive to replace after a disaster strikes.

4. Consider your options carefully Experts are divided as to whether residents in Knysna will see an increase in their insurance premiums after the fires. The consensus, though, is that insurers will most likely maintain their premiums for the first year and then escalate them in the second. If you’re not happy about this, you can switch insurers.

Annelie Smith, corporate executive at Risk Benefit Solutions, says: “It is possible that some insurers could offer you better premiums, but always make sure that the benefits and cover in the new policy are the same or better as those of your previous insurer.”

5. Preserve your paperwork “Make digital copies of all important documents such as wills, ID documents and valuation certificates, and store them online or keep duplicates off-site,” says Erasmus.

6. Safety first Check if things such as gas heaters and the earth leakage circuit breakers are working properly. The circuit breaker is a safety device that all homes have built in to their electrical installations and it trips the electricity if a dangerous voltage is detected.

While maintenance of a property is expensive, it’s vital because loss can be catastrophic. Van Niekerk points out that faults with the electrics may not be covered by insurers as homeowners are obliged to maintain their homes. If they don’t, they may be accused of negligence by the insurer and left to pay the costs on their own.

THE BENEFIT OF A FULL ASSESSMENT

Towards the end of last year, we decided to review our household insurance and had an assessor conduct a full assessment. She spent more than two hours going through our house – checking every cupboard and noting all possessions.

It was a very interesting process and I realised that I was extremely out of touch with the replacement value of household furniture. The mental calculations about how much it would cost to replace my lounge suite, for example, was unrealistic – if I wanted the same quality. I also forgot about some of my possessions, such as my binoculars.

The benefit of compiling a comprehensive list is that I don’t have to prove ownership in the event of a claim, and I know my claim will be paid out in full without any follow-up assessment as long as I review it every few years. While I was worried about the effect this would have on my premium, it actually went down a bit. – Maya Fisher-French