Warning for South African home and car owners

With severe weather events on the rise in South Africa, it is becoming more and more important for home and car owners to make sure that their property is insured.

Recently, a tornado swept through Montana in northern Pretoria, causing widespread damage to cars, buildings, the contents of these buildings, external geysers, and more.

Trees were uprooted, roofs were blown away, areas and roads were flooded, and many residents had to be evacuated.

Although South Africa isn’t historically known as a tornado hotspot, this was the second such weather incident within a year.

King Price Insurance client experience partner Wynand van Vuuren noted that the country’s most common natural disasters – floods, droughts, fires, and large storms – are on the rise.

In addition, lightning strikes, hail damage, wind storms, and sea level rises are occurring more often.

This means that consumers who do not insure their cars, buildings and home contents are becoming increasingly vulnerable.

“The cost of fixing the damage caused by natural disasters is increasing every year, and South Africans who do not have adequate insurance are having to pay these costs out of their own pockets,” he said.

Having to fix damage caused by a natural disaster can be a devastating blow to your finances.

Notably, only around 30% to 40% of the cars on South African roads are insured.

TransUnion’s H1 2024 Insurance Trends Survey found that a significant 64% of homeowners did not have homeowners insurance.

Of these, 49% cited an inability to find suitable insurance, and 24% believed they didn’t need it.

Van Vuuren explained that when it comes to their buildings and home contents, most South Africans focus on cover for robbery and break-ins, but they don’t pay enough attention to protecting their homes and possessions against the effects of natural disasters.

If they do, many are underinsured and often only realise this when it’s time to claim.

Under-insurance happens when your buildings and home contents are covered for an amount that’s less than their replacement value at today’s prices. In such cases, valid claims are paid out proportionately, van Vuuren said.

For example, if your building’s value is R400,000 and you only insure it for R200,000, you’ll likely only be compensated for 50% of your loss.

According to industry reports, up to 60% of South African homes are underinsured.

In 2024, natural disasters worldwide caused losses estimated at $320 billion (R5.89 trillion). Of this, only around half were insured.

Munich Re, one of the largest reinsurers in the world, polled homeowners about whether they’ve considered expanding their insurance in response to increasing weather disaster risks. Around 57% of respondents indicated that although they want to do so, cost is a factor.

“One of the main reasons that people give for not insuring their property is financial,” Van Vuuren said.

“I always ask these clients what they would do if they lost their house. Can they afford not to insure their buildings?”

According to InsureEasy Brokers, homeowners or building insurance costs an average of R200 to R600 per month for a house valued at R1 million.

A house worth R2 million could cost R500 to R1,200 per month, depending on risk factors like location.

Contents insurance for contents valued at R300,000 costs around R150 to R400 per month, depending on the level of coverage and added security measures.

A combined policy, which covers the building and its contents, may cost R500 to R1,500 per month, depending on the property’s value, location, and coverage type.

Van Vuuren said that what adds to the underinsurance problem is that many consumers doubt the ability of insurers to pay massive claims caused by natural catastrophes, which can run into hundreds of millions of rands per event.

“When it comes to paying claims, there’s no need for concern. In South Africa, the industry regulator requires all insurers to maintain adequate surplus funds for potential claims,” he said.

“If you lose your house, you’ve dotted the Is and crossed the Ts on your insurance policy, and your claim is valid, you’ll be paid out.”