Insurance implications of a multi-generational household

Christelle Fourie, Managing Director of MUA Insurance Acceptances.

According to statistics from the The World Factbook, approximately 9 out of 10 South African homes are three-generation households proving that the rising cost of living and soaring house prices have meant that more South Africans are choosing to live in a multi-generational home. However, the occupants of these multi-generational homes fail to realise the resultant insurance implications of these living arrangements.

This is according to Christelle Fourie, Managing Director of MUA Insurance Acceptances, who says that homeowners often do not fully understand the implications of choosing to live in a multi-generational home. "As a result, they expose themselves unnecessarily to the risk of an insurance claim rejection or a reduced pay-out as a result of underinsurance."

Homeowners need to ensure that they revisit their policies, update these if necessary such as noting the interests of additional family members, increase the cover and also consider other types of insurance, she says.

Fourie lists a few of the common mistakes that people make when changing their living arrangements, or home.

Underinsurance of household contents

Living in a multigenerational household often means that family members may bring their own assets into the home, she says. "Should the contents of the home be more than the value of the cover in place, this may mean that the claims will not be fully paid out to compensate for any loss that may take place."

Fourie says a big problem many homeowners face when insuring the contents of their home is failing to insure the contents for the correct and updated replacement value. "Most people tend to take out a home contents insurance policy and simply renew it every year, without taking the necessary steps to update their level of cover, despite having purchased new contents for their home."

She adds that another common problem with regards to insuring home contents is forgetting to take price inflation into consideration. "A piece of electrical equipment that cost R5 000 ten years ago, could now cost twice that to replace. This is why it is so important to conduct regular valuations of home contents and to provide this updated value to the insurance provider to ensure adequate cover, especially when it comes to providing accurate values for any jewellery you may have."

Car insurance

Fourie says that another consideration that policyholders need to take into account is that any additional family members using the family vehicles may not necessarily be covered by the insurance policy.

"Policyholders place themselves at risk of claim repudiations or additional excesses if an unregistered driver is in an accident."

Home extensions

Fourie points out that if a policyholder makes any alterations or extensions to the property, this will have a direct impact on the insurance policy.

"Any form of upgrade to the property in order to accommodate family members moving in will mean that the existing home insurance policy will need to be reviewed to reflect this."

Regular maintenance

Negligence and lack of regular maintenance may increase the chances of claim repudiations, adds Fourie. "The reality of having more people living under one roof is that the home is more susceptible to wear and tear, or damage.

Most homeowner's insurance policies will only cover damage caused by unforeseen events and regard home maintenance as the responsibility of the homeowner. Thus, any claims determined as a result of poor maintenance or neglect are most likely to be rejected."

"Many homeowners may choose to have a multi-generational homes assuming that their insurance claims won't be affected. However, it is vital that policyholders make sure that the type and amount of insurance cover that they have will adequately cover any changes to the living arrangement and home itself," concludes Fourie.