Insurance 101: Are you fully aware of the costs associated with fire damage?

The recent fires across the South Peninsula in March have highlighted the extreme damage which a fire can cause. The seven-day fire in Cape Town resulted in the damage of 13 houses and 500 people having to be evacuated from their homes. A total area of 6900 hectares of land was also effected, which is expected to cost approximately R6 million in damages.

According to Yulanda Paterson, Managing Director of RBS Insurance Administration Services (RBS IAS), the administration company for Risk Benefit Solutions (RBS), the frightening truth is that there is at least one fire every day in Cape Town, and many individuals aren’t fully educated on all the costs associated with fire damage to a property.

“We all believe that ‘it will never happen to me’. The trouble is that, at some stage, there is a possibility that it could happen to you, and the costs associated with this disaster can quickly escalate if you aren’t prepared for such an incident.”

It was reported by the Goodwood Fire Station in January 2015 that the number of structural fires had increased from 331 for the 2013/2014 season to 694 this season, and that the general number of incidents responded to has risen from 3 456 to 7 949. “Fire damage to property isn’t always caused from natural disasters, and can range from appliances overheating, unsafe electrics and faulty plumbing to exposed wiring and lack of an earth leakage unit,” say Paterson.

Paterson expands on various facts that individuals need to know when it comes to the costs involved with fire damage and insuring a property:

How fire damage can impact a home owner: The cost of home (building) insurance is not as costly as it seems, in fact, it is one of the cheapest forms of short term insurance, says Paterson.

Apart from the obvious costs of having to repair or rebuild a property, there is the additional cost of finding alternative accommodation should the property become uninhabitable due to the damage. “Most building policies provide rental cover for the individual which extends to cover the cost of alternative accommodation until the property becomes habitable again. It is important to check that this type of cover is in place.”

She says that when purchasing building insurance, it is crucial that individuals are adequately insured should a loss occur. “If you have insured your home for less than its actual value – i.e. you are under insured - then you will have to bear a proportion of any loss in the event of a claim”.

Paterson recommends that individuals have sufficient cover to re-build their home at today’s prices or alternatively to buy another home of equal quality should the worst case scenario happen. “If you are adequately insured most insurers will provide interim payments to assist with immediate costs.”

Fire services costs: Home owners are responsible for the cost of the emergency and fire services deployed to assist in the event of a fire. “A building insurance policy extends to cover the reasonable cost of emergency services. However, without insurance the home owner will have to face the cost for those services in addition to the loss just suffered.”

Costs of demolition and professional fees: There is also the significant cost of demolition and professional fees which need to be accounted for should a building be damaged, says Paterson. “If your building has to be demolished as a result of a fire, a building policy will pay for the costs of demolishing the building, removing the debris and erecting hoardings required for building operations to commence. Fees for architects, quantity surveyors and consulting engineers are also included, as well as the fee for the local authorities and any action required by a municipality.”

Liability exposure to cover unforeseen costs: The other issue individuals need to be aware of is liability cover. “Should a fire, emanating from your property, damage third party property and you as the homeowner are found to be liable due to neglect in maintenance of electrical wiring, or making use of a non-qualified contractor for example, the homeowner becomes responsible for the damage to that property.” Paterson adds that individuals should confirm that their policy extends to cover Personal Liability: “With such cover, the costs homeowners are liable to pay to third parties due to any injury, loss or damage caused by a fire – whether, by accident, or through your own negligence – will be covered.”

“Damage to a property is a traumatic event, and without adequate cover in place individuals run the risk of financial ruin. Insurance will not only cover the costs associated to repair the actual damage, but will also provide peace of mind in an event of a fire,” concludes Paterson.