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SA's No 1 Insurance Blog

In my previous post we discussed Fire Insurance or as it is commonly known – Property Insurance.
If you can recall we mentioned that under the fire section you can insure:

  •  Your buildings
  • Your machinery
  • And your stock in trade

So why would you need buildings combined insurance?

The truth is that you wouldn’t normally.
However, if you make your living as a landlord, then ‘buildings combined’ is an ideal way to insure your building and the various risks you face.

So what are the benefits for a landlord?

There are three main areas of risk which are provided for with this type of insurance.

Damage to

  • buildings,
  • outbuildings
  • fixtures and fittings
  • walls, gates, and fences
  • paved or tarred roads and driveways
  • parking areas
  • sports or recreational structures

Loss of rent as a result of the property being so damaged by one of the perils mentioned below that the premises become untenantable. Loss of rent is limited to 25% of the sum insured. In other words, if your building is insured for R1, 000, 000 (and that the replacement value is also R1,000,000!…don’t say I didn’t warn you about ‘averaging’) then your coverage under this section is limited to R250,000!

Legal liability as landlord for any damages which result in the accidental death or bodily injury/illness of any person or the accidental loss or physical damage to tangible property occurring on the landlord’s property (There are exceptions to what exactly is covered under liability and you need to study your schedule for these). Liability cover is limited to R1, 000, 000!

When would I be able to claim under this type of insurance?

Any damage resulting from one of the following insured perils would allow you to claim:

  1. Fire, lightning, thunderbolt, subterranean fire, or explosion
  2. Storm, wind, water, hail, or snow (with a few exceptions)
  3. Earthquake
  4. Aircraft or any aerial devices dropped from them
  5. Impact by animals, aerials, satellite dishes, or vehicles
  6. Theft accompanied by forcible and violent entry or exit from the building as long as the property is occupied at the time of the theft
  7. Accidental damage to sanitary ware
  8. Accidental damage to the water, sewerage, gas, electricity, or telephone lines connecting the property to the main supply for which the landlord is responsible.

Can any other type of cover be added to this?

The short answer is yes…the following extensions can be added:

  •  Subsidence and landslip extension

This involves the sudden sinking or slipping of the building. Damage to drains, boundary walls, gates, and fences are excluded from cover. Damage caused by faulty design, workmanship, or structural alterations taking place at the time of the incident is also not covered.

  •  Prevention of access resulting in loss of rent extension

Imagine for a moment that an explosion takes place at premises 5 kilometres away from yours. As a result, none of your tenants are able to access your building. This extension would cover the loss of rent receivable during the period that your premises are inaccessible. This amount is limited to 25% of the sum insured and applies to all premises within a 10 kilometre radius of yours.

  •  Escalator clause extension

The sum insured of your building itself can be increased during the year by the percentage nominated by you. Once a year you nominate a revised sum insured as well as the percentage increase in cover required.

  •  Malicious damage extension

This indemnifies you for damage directly resulting from the deliberate act of any person whose sole purpose is to cause damage. Note that damage resulting from theft is not covered here.

  • Riot and strike extension

Damage to your property caused by riot and strike outside RSA and Namibia can also be added onto your schedule.

Riot and strike within South Africa is covered by SASRIA – a separate insurance company. You’ll normally find that a premium for this cover is included at the bottom of your schedule.

What else is automatically included?

The following clauses are usually added to your schedule:

  •  Security firms clause

Can you imagine the security firm you employ to protect your premises is involved in the assault of a suspect? The suspect, in turn, sues the security company for assault and wrongful arrest. The security firm kindly refers the suspect to you. In terms of your agreement with the security company, you absolve them from any legal liability at all. Fortunately, you enjoy legal liability cover in terms of this clause.

  • Architects and other professional fees clause

Yip, new plans, estimates, quantity surveying all cost money! This clause provides limited cover.

  • Capital additions clause

Made some alterations to the premises but failed to increase your insured value?  A limited amount of cover is offered under this clause.

  • Cost of demolition clause

No one’s going to remove your rubble for free. This clause takes care of that problem!

  • Fire extinguishing charges clause

If you’re legally liable for these costs then you’re covered under this clause.

  • Municipal plans scrutiny fee clause

This clause covers the cost involved in viewing your own building plans at the municipality.

  • Public authorities requirements clause

Possibly the building laws have changed since your premises was built. In order to conform to the latest building regulations, you need to make additional structural changes which are going to cost more than what you’re insured for. This clause provides for the additional expense.

  • Railway clause

OK, so Spoornet has got you tied in with their ‘hazardous premises indemnity’ agreement relating to private sidings. The good news is that your insurance will not be prejudiced by the signing of this agreement.

  • Tenants clause

So your tenant failed to comply with the terms of your insurance schedule. The good news is that you as the insured won’t suffer because of your tenant’s non-compliance.

Watch Out!
‘Average’ is applied to the buildings combined section of your policy. To find out more concerning ‘average’ please click here.

In the next post, I’ll discuss office contents insurance.

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