04 Sep The value of your home
There is often some confusion when it comes to the insurance value of a home. Snyman and van der Vyver director Inus Marais provides some perspective and also asks whether your home is adequately covered.
You can attribute 4 different values to a house:
- The market value
The market value is the selling price of a house. This value includes the structure, the value of the erf and other intrinsic values such as location, views, proximity to schools and shops, etc. This market value can therefore likely be much higher than the cost of rebuilding the building only.
- The municipal value
The municipality attributes a value to calculate the rates and taxes to be paid on the property. The municipal value should be closely linked to the market value but it is often lower as valuations are generally a few years behind.
- The bank’s value
The value is generally linked to a selling price and costs if the house needs to be sold in the event of the owner defaulting on the bond. The bank’s value is confusing as their value takes into account their calculations on repayments of the bond, including finance costs.
- The insurance value
This is the only aspect relevant for ensuring that the policy adequately insures the house or structures. The insurance value is directly linked to the building cost per square meter to replace the current structures with new structures. When we refer to a new structure, it is important to note that the new structure includes all the fixtures and fittings. To this must also be added all other structures, such as swimming pools, drive-ways, walls, fences, etc.
There is a difference in the building cost of houses, influenced by factors such as material used, fixtures and finishes among others. It follows that the more expensive finishes such as imported tiles, bathroom accessories and other luxuries are, the more the building cost per square meter will be.
“If your insurance is still based on the original building costs of some years back, the chances are good that the house could be under-insured. If you have then also added to the house or upgraded fixtures and fittings, you should be checking on the insured value. You would need to consider the current building costs to replace your structure and have the value amended, if need be, as under-insurance will be punished at claims stage,” cautions Inus.
The onus is on the client to ensure that their house or structure is adequately covered. Contact us for details of professional valuators who can assist you.