Highlights in this issue:

*** Are you paying 20% more than you need to? Here’s how to check…
*** The #1 thing you can do to cut your premiums by up to 5%…
*** Are you happy with average returns...?

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From the pen of Karin Iten…

Dear Investment Academy Reader,

You wouldn’t drive a new car off the show room floor without shopping around for insurance would you? But, the number of people who don’t plan their insurance properly would surprise you. And no, I’m not talking about insuring your furniture, jewellery and appliances – that’s obvious. I’m talking about insuring the bricks and mortar against flooding, fire and even wind.

But not doing it right can come back to bite you. That’s why you should start shopping around as soon as the owner accepts your offer to purchase. Here are five tips to help make buying homeowners’ insurance cheaper…

Tip #1: Insure your home, not your land
According to insure.com, you should never insure your land. “Although your home and its contents are at risk from fire, theft, windstorms and other perils, the land your house sits on is not. Don’t include the value of the land in deciding how much homeowners’ insurance you need to buy.”

And don’t forget to consider the location of your property as well. It’s lovely to live near water, but insurance will cost more if you do. In waterlogged areas without good drainage (such as by a river, near a lake or even on the beach), average premiums are about 20% more than other areas. If you move to slightly higher ground, you’ll pay far less.
 
Tip #2: Improve security and safety
Before you sign on the dotted line, ask your insurance agent what steps you need to take to make your home more resistant to windstorms and natural disasters, says CNN Money. If, for example, you live on the Highveld where summers storms are notoriously violent and your bedroom has a skylight, find out how you can protect it from hail damage. Reinforcing your roof with stronger building material, sloping your driveway to avoid water build up or modernising your electrical system will also save you money on your premiums.

And don’t forget to have a smoke alarm installed in your house too. Not only would it save your life in the case of an emergency, it could cut your annual premiums by up to 5%.

Tip #3: Get the best rate by determining your own insurability
To get the best premium, make sure your insurance agent has all the facts. Here are the five most important things you’ll need to tell them:

*** When your home was built and how old your plumbing and electrics are:
Remember, if you’ve bought an older house, the previous owners may have upgraded the wiring and plumbing. If they did, make sure you inform your insurance broker. Old wiring and plumbing causes lots of problems, so if yours has been upgraded, it should save you some cash. If your electrical and plumbing systems are less than ten years old, you’re likely to get your insurance cheaper.

*** What type of roof do you have:
If your roofing is old, you may need to consider reinforcing it against weather disasters such as hail and heavy thunder storms. If, for example, you have a leak, this could affect the wiring and cause your ceiling to collapse. So ask your broker how much you can save if you fortify your roof and what’s the best way to do it.

*** How large your house is:
Think back to my first tip, in the case of homeowner insurance you aren’t insuring your land, you’re insuring your house. So make sure you know how many square metres you own. If your house is a double storey or you have a basement, don’t forget to include this in your calculation.

*** How many claims have been filed over the past five years
This part is two-fold. First, you’ll need to disclose how many claims you’ve personally filed. This will help your broker determine whether you’re a high-risk client or not. (If you insure with the same company – see tip #4 – they’ll have these records on file.)

The second part you’ll need to ask the previous owner or the estate agent about. Before they insure your house, an insurance company will want to know about any previous issues that have taken place. For example, they’ll want to know whether there was an internal fire and what caused it. Was it an electrical fault? Or did the source come from a neglected fireplace? By having this information, your insurance broker will be able to pinpoint the “high-risk” areas in your home and advise you on how to protect yourself better and cut the cost of your premium.

*** Where your home is located:
If your home is located on the outskirts of town without a nearby fire department, some companies will charge a higher premium or flat out refuse to insure you. So make sure you know what emergency services you have in your area and use this to your advantage when negotiating your premium.

Tip #4: Use the same company
Long-term policy holders often receive special rates and get better service. This relationship also gives you a good leg to stand on should you wish to negotiate a lower premium. But that doesn’t mean you shouldn’t shop around. Get three quotes and, if you find a lower one, approach your insurance company and find out if they’re willing to beat it.

Tip #5: Pay off your bond
Did you know that homeowners that pay off their bonds are likely to see their premiums drop? Why? Well, according to personal finance writer, Glenn Curtis, it’s because “insurance company figures if you own your home outright, you’ll take better care of it”.

Where to go for free insurance quotes:
*** www.dialdirect.co.za
*** www.insurance-southafrica.co.za
*** www.outsurance.co.za

Here’s to your financial freedom,

Karin Iten
For the Investment Academy