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Why the need for insurance when buying home? Is it compulsory for me to get approval?
Property buying and insurance are inseperable components – which home buyers have to make proper considerations when embarking on a Property Finance and/or Home Finance application process. In addition, knowing the types of insurance involved in the process is as important of a preparation as knowing the requirements of the home finance application process.
Bond Insurance: is a type of insurance required by banks to cover the risk inherent in financing the property (asset) against any damages that may affect the integrity of the interior and exterior of the building structure of your property. It is a very important and compulsory requirement that must be in place before banks can give Final Approval of the required loan to finance the purchase of your property.
As indicated – home buying and financing aspect is both an interesting and complex process, which in its own presents various critical factors to consider by both home buyers and banks and/or lending institutions involved in the consideration and evaluating your home loan application.
unfortunately , these considerations don’t only end with the buying of a building. It carries with it many inherent risks involved that can negatively impact both side, as we know life has its ups and downs and can be very unpredictable.
There are inherent risks to consider!
- In the event of your death as the family breadwinner – you may also be the sole person responsible for the upkeep of monthly bond repayments. This could spell and bring such unimaginable devastation to a family on all ends, which may include loss of the home as a result of defaulting on Bond Monthly Repayments.
- There may be economic reasons that may negatively impact the your ability to earn income – such as loss of income due to any economic downturns that may result to you as the breadwinners placed through forced lay-off and/or retrenchments.
- Unforeseen life’s circumstances may include temporary or permanent disability leading to loss of income.
- The list may stretch quite wider even including natural disasters that may result in damage to the actual building structure of your property or danage to home contents. So as result of these and other factors, banks make it a requirement for home buyers to have Bond Insurance – which will be used to cover the Outstanding Bond Balance of your Bond Account in the unfortunate and unforeseen events as listed herein above.
- The rational as indicated, banks and/or lending institutions require making provision for bond insurance, which will be used to settle the any remaining balance in your bond account against risk instances – such as loss of life or disability, and while Building Insurance covers any damage to the internal and external structure of your property.
Therefor the use of insurance in property finance application process – helps to ensure the protection of both the bank’s interest and your family’s for the financed property as it constitutes an asset to both parties.
Insurance in its own also comes in many variations and this article provides an explanation as well as description some of the more common variations of the insurance options available to the home buyers as may be required by banks and/or lender to be in place before issuing the Final Grant or Home Loan Approval to finance your new home.
Commons Insurance Types
Bond Protector: This type of insurance is generally taken on the life of the home buyer or breadwinner, as intended to provide for dependents in the event of the death/passing of the person responsible for the monthly bond payments, this ensures that any remaining balance of on the bond account is settled with the bank/lending institution. This helps to ensure continuance of the lifestyle the family was accustomed to even after the passing of the breadwinner.
Buiding Protecor: Often called home owners insurance or simply referred to as building insurance often covers any destruction or damage that may occur to the interior and exterior of the newly acquired home, loss or theft of possessions, and includes personal liability for harm or injuries to others (third-parties).
Home owners insurance covers against cases of an unfortunate misfortune or occurrences, such as loss due to theft of possessions (home contents) or damage to the physical structure of buildings. Other insurable perils included are fire, plumbing and natural disasters like flooding, lightening strikes, land slides, earthquakes.
Home Contents Insurance: cover protects the house contents against perils such as Theft, Intentional Damage, as well as damage caused that may result from other elements like Power Surge or a Burst Geyser. It also includes damage caused by Fire, Lightning Storm, Hail and Floods.
