THE IMPORTANCE OF REAL ESTATE INSURANCE

THE IMPORTANCE OF REAL ESTATE INSURANCE

This week on Talking Property with The Consortium Properties, we will be looking at the importance of real estate insurance in Zambia.

It is generally accepted that we cannot avoid certain things from happening but we can definitely limit the way those things affect us and therefore reduce our exposure to certain risks. Property insurance is one such way of reducing our exposure to certain risks. It is a safety net against damage caused by mother nature and tenants or property occupiers. Property insurance in general terms covers the property and the structure itself. It does not cover the belongings of a tenant or household furniture. Tenants are usually encouraged to buy renter's insurance. 

Insurance coverage comes in many shapes and sizes, so you may need to talk to your Lawyer or Insurance company in order to design a policy best suited to protect your property. In general terms, insurance coverage will provide you with protection against damage to the property from events such as civil commotion, glass breakage, and vandalism to lighting, fire, smoke or damage resulting from a car running into your building.

Most insurance companies in Zambia insure offer house owners insurance which covers fire and allied perils. Loss due to fire, lightning, windstorm, flood, or theft are covered by such a policy. It is however important to note what the policy does not cover against by discussing it with your insurance broker. 

Property owner can also insure their properties against business disruption or loss of rental arising due to property damage. This would be ideal in cases where a rental property is mortgaged to the bank and rentals income is what is used to service the loan facility. 

There is also a separate policy for householders and household content. This is where can tenants or property occupiers can insure their personal belongings and furniture against fire or allied perils. It is therefore prudent for property owners and property occupiers to cover their properties against such risks.

If you would like to insure your real estate property, a Registered Valuation Surveyor can prepare an insurance valuation report which would then be used by the insurance company to determine the insurance premium for your property. An insurance valuation is essentially the estimated cost of reinstating the property with a new or equivalent one for insurance purposes. Insurance value is the full cost of re-building the property in the event of total destruction by fire, storm, or other perils including the replacement value of fixtures and fittings in a condition equal to, but not better or more extensive than its condition when new.  Factors considered in establishing the replacement or reinstatement cost will typically include:

-specific building materials used in the construction of the building 

-location factors 

-design of the building

-demolition costs and removal of debris

-fees associated with reconstruction such as architectural fees, surveyors, and engineers

-inflationary provisions

Please note that to reinstate assumes an individual event and does not reflect a widespread or national disaster impact. 

It is generally recommended that insurance valuations are completed every two years to ensure the current costs of building are taken into account. Insurance brokers will generally advise on the sum insured each time the policy renews to reflect the inflationary increases in building costs. 

Most people do not insure their properties because it is generally held that property insurance is expensive. However, we are reliably informed that property insurance premiums start from as low as K 500 per year depending on the value of the property.

This clearly shows that considering the risk of total or partial loss to your property, which is very expensive, it is of utmost importance for property owners to insure their properties. Moreover, people always insure their vehicles which cost far much less than real estate. We therefore strongly recommend that property owners insure their properties.

In order to ensure your commercial or residential properties are well protected, do not hesitate to contact us for additional information.

By: The Consortium Properties