Building insurance value calculations

cavedog

cavedog

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Quick question.

When taking out building insurance for a purchased property what amount do you insure it for?

My SO bought a house cash for R1.5mil. Immediately got the property insured for the purchase price as per the documents. 10 months later we are hit with a massive hailstorm that caused quite a bit of damage.

The assessors came and had a look and approved everything.

Now old mutual insure has finalized the claim with these findings.

Estimated damages are R42 000 however it is determined that the property is under insured by 50.45% and therefore the damages will only be covered to a maximum of 49.55% less the excess payable.

Does this sound right? The policy shows the property is correctly specified with all extras like pool, aircons, no thatch, electric fence, electric garage doors and the value insured as R1.5mil.

According to Old mutual the insured value should at least be R3.1mil for full cover.
 
Yeah you don't pay for the value of the property but what it would cost in repairs
 
Ask Old Mutual why they did not insure it for the correct value.

My insurance has mine insured WAY above market price.
 
My insurer Santam/PSG always insures for more than purchase price to deal with costs if the house is destroyed by fire for example. But certainly not 2x as some have posted above.
 
purrr said:
My insurer Santam/PSG always insures for more than purchase price to deal with costs if the house is destroyed by fire for example. But certainly not 2x as some have posted above.
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It depends where you live. In Cape Town your insured value can easily be < 1x your purchase price.
 
I don’t even know why this calculation is a thing because it’s so cheap to begin with.

Both building insurance and home contents just over insure the kak out of it and pay the R20 more every month.

OP get a broker and don’t do this direct stuff, then you wouldn’t have these problems.
 
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Had a look at my policy and the insured amount is about 30% more than purchase price + transfer/bond costs. This on properties purchased in the last three years. They will or should escalate it annually so over time it will differ substantially.
 
cavedog said:
Quick question.

When taking out building insurance for a purchased property what amount do you insure it for?

My SO bought a house cash for R1.5mil. Immediately got the property insured for the purchase price as per the documents. 10 months later we are hit with a massive hailstorm that caused quite a bit of damage.

The assessors came and had a look and approved everything.

Now old mutual insure has finalized the claim with these findings.

Estimated damages are R42 000 however it is determined that the property is under insured by 50.45% and therefore the damages will only be covered to a maximum of 49.55% less the excess payable.

Does this sound right? The policy shows the property is correctly specified with all extras like pool, aircons, no thatch, electric fence, electric garage doors and the value insured as R1.5mil.

According to Old mutual the insured value should at least be R3.1mil for full cover.
Click to expand...
You insure property at the cost it would take to rebuild/repair if something were to happen to the house.. typically insurers would work on the total cost to rebuild the house as it stands, including floor coverings, sanware and anything else that's not household contents..

The one benefit of taking a mortgage to buy a house, the banks assessor will come out to inspect and determine this cost to insure..

I guess your SO was not advised of this as a cash buyer..
 
Tomtomtom said:
It depends where you live. In Cape Town your insured value can easily be < 1x your purchase price.
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I'm in Cape Town and if I use the Municipal valuation, my place is insured for more than 2 x their value.

My insurance asked for all the details and made their own valuation. I thought all insurance companies would do that. Contents of course is a whole different kettle of fish.
 
SauRoNZA said:
Huh? Making jokes I assume.

Rebuilding cost is never ever cheaper than purchase price.
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Try that ABSA calculator I linked to. For 120 sqm "middle-class" I get < R 2 million

Try finding a house for sale in, say, Rondebosch for less than R 3 million.

Note the sqm is the building size, which is obviously < 1x the erf size.
 
WAslayer said:
You insure property at the cost it would take to rebuild/repair if something were to happen to the house.. typically insurers would work on the total cost to rebuild the house as it stands, including floor coverings, sanware and anything else that's not household contents..

The one benefit of taking a mortgage to buy a house, the banks assessor will come out to inspect and determine this cost to insure..

I guess your SO was not advised of this as a cash buyer..
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When I first queried their valuation I was told that they have just over R1mil for demolition and site clearance. So it's not only the cost to rebuild that comes into it.
 
Tomtomtom said:
The replacement cost.

Property Insurance Calculator – Know Your Home’s Value

Use our Insurance Calculator to quickly determine your property’s value and get the coverage you need. Easy, accurate, and tailored for your home.
www.absa.co.za www.absa.co.za
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Looks about right then. Broker screwed us. First time house buyers and we asked them to insure the building and contents correctly and they assured us that this is correct. Now they are just lift their hands. :cautious:

Screenshot 2026-01-20 164704.png
 
Tomtomtom said:
Try that ABSA calculator I linked to. For 120 sqm "middle-class" I get < R 2 million

Try finding a house for sale in, say, Rondebosch for less than R 3 million.

Note the sqm is the building size, which is obviously < 1x the erf size.
Click to expand...

Yeah but that calculator is just a loose calculation.

Your proper broker would do a full on calculation for exactly the location down to every detail of motorised garage/gate and every single amenity included etc.

Not to mention the minor detail of “for sale” price not necessarily lining up with actual value.

Usually the bank would have advised on this at the time of taking the bond and in most cases required the insurance to be up to scratch.
 
ghaye said:
When I first queried their valuation I was told that they have just over R1mil for demolition and site clearance. So it's not only the cost to rebuild that comes into it.
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I assumed that's self explanatory, since you can't rebuild until the site is cleared...
 
mine i think is around 50% more ..so its based on replacement cost if the house had to burn down

i also have contents cover to around 500k ....most of this was for my clothes
 
SauRoNZA said:
Did the bank not require proof of insurance?
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It's a cash purchase so we pretty much had to do all this on our own. No bank was involved. The estate agent referred us to a broker who got 3 quotes for us, and we went with that as Old Mutual is a well-known brand.
 
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