Why bother with home insurance?

Reports indicate that domestic insurance only takes 1.8 per cent of the total premiums. Wangeci Kanyeki explores the benefits of covering both the structure and its contents

Three weeks after the Kariukis moved into their home, burglars broke in and within ten minutes, they were stripped of their possessions and critically injured. This devastation left the couple discouraged and burst their bubble of being homeowners.

Such an incident can happen to anyone, anytime, irrespective of race, creed or social status. It, therefore, must be guarded against because trying to replace the stolen items can be a long and costly venture.

Simply defined, property insurance is the protection of property against theft, damage, fire and natural disasters. Most Kenyans have a negative perception towards insurance and do not want to discuss or even contemplate eventualities in case of death or disaster, lest they come true. However, insurance can save you the heartache of losing what you have sweated over for many years.

One can insure either the structure of the house and/or the contents of the house, depending on whether one is a homeowner, tenant or both.

Most homeowners in Kenya have sacrificed a lot to buy or build a house. Others have used all their retirement money as capital yet it takes just a few minutes for an unfortunate circumstance such as burglary, fire, floods or even impact from falling objects to destroy their treasure.

Unfortunately, according to chief executive officer of Real Insurance Kenya, Mr Joseph Kiuna who is also an associate of Chartered Institute of Arbitrators, "Kenyans do not take home insurance seriously because it is a low frequency risk. However, it causes a great financial and sometimes irrecoverable loss to the affected. This is reflected in the Association of Kenya Insurers year 2009 data, which shows that out of the total industry for short term insurance of Sh43 billion, domestic package premiums only contributed 1.8 per cent. This means awareness levels of the benefits are still very low".

Just how much does it cost to insure a home? Mr Kiuna who has 20 years experience in the industry says it would cost from about Sh8,000 per annum to insure a Sh4 million building and about Sh10,000 per annum to insure a Sh5 million house. This would cover the building and contents against loss or damage by fire, lightning, earthquake, storm tempest or floods.

Some insurers also cover against riot, strikes, vandalism and malicious damage. Costs of theft or attempted theft such as breaking of doors and windows are also covered.

To cushion your misfortunes, the insurance may pay for cost of debris removal as well as fire brigade charges if you had to call them to put out a fire. In addition, it will pay for your out-of-budget expenses such as council approval fees, architects, surveyors and consulting engineer’s fees in case they will need to draw another plan to reconstruct your premises.

A good insurance cover may also cushion you by providing some contribution towards finding alternative accommodation as the reconstruction takes place. In case you had rented out the building, the insurance cover compensates for the loss of rental income.

Should tenants insure?

It is definitely a key concern to a homeowner to insure his building, but what if one is a tenant? Is there any need of taking an insurance cover?

Take the case of the Odhiambos who were renting a house in South C, Nairobi. One night, burglars broke into their house and within 15 minutes had stolen electronics, including a television and home theatre. Some of these items had sentimental value, as they were wedding presents. Uninsured, the family had to look for alternative shelter, pay rent and deposit, pay deposits for new utility accounts and try to replace stolen furniture and other items.

According to Rosemary Kariuki, General Manager at Your Choice Insurance Agency, taking a domestic insurance cover will protect against losses of your furniture and furnishings in case of theft, vandalism, malicious damage, fire, lightening, earthquake, storm, floods, riots and even strikes.

In case of a fire, a good cover will also compensate fire brigade charges, debris removal, guests and domestic servants effects as well as trauma counselling for the residents affected.

After labouring for many years to get where you are — from buying your first sofa to upgrading your refrigerator — damage or absolute loss means you have to start from scratch.

This may happen when you are jobless or strained financially, meaning you have to totally depend on family and friends to help you get back on your feet. Taking an insurance cover ensures you have a head start in replacing your items.

It is fairly easy to get a cover for the contents of your house. You just need to present a list of furniture and furnishings to an insurer and indicate the cost of each item. For a Sh500,000 total content inventory, the premium would come to about Sh5,000 per annum.

Workers compensation

Taking a domestic cover usually includes compensation for one worker in case of injury or death at the work premises.

According to the Workers Injury Benefits Act, if a worker is injured or dies at the work premises, they should be compensated with an eight-year salary.

If you have more domestic workers such as gardeners, drivers, watchmen, cooks or house helps who accompany you during travels, an additional annual fee of between Sh100 to Sh500 is charged per worker. The cover compensates 96 months’ pay in case of an accident, injury or death. Some covers may also include funeral expenses should the worker die due to an injury in the line of duty.

Jewellery and laptops

Thieves are notorious for looking for valuables such as wedding rings, gold chains, laptops and photographic equipment such as cameras. These too can be insured against all risks. Other items in this category include golfing equipment, spectacles, watches, which would be compensated if stolen or damaged, after the depreciation has been factored in.

Exemptions

Insurance usually covers first class construction buildings such as stone houses, but will exclude or increase the premium for timber or makuti structures. Slum houses are also excluded from the policy because of the high risks involved. Usually, after an incident or accident, the insurance company sends a loss adjuster to establish the cause of fire and cost of loss as well as detect frauds and ensure there was no deliberate arson, which is excluded from the policy.

Due diligence

However, just because one is insured does not mean they can throw caution to the wind.

"You should be prudent and behave as though you are not insured. Put security measures in place, close all windows at night, install security lights, have a guard if possible and inform someone when you are away so they can keep an eye on your home in case of suspicious intruders. If the house is left unoccupied for more than 30 days, it is prudent to inform your insurer," says Kiuna.

Conditions before insurance

Before you take a domestic cover, shop around for the best deal and carefully consider the fine print terms and conditions for compensation. Unlike most covers, the domestic cover rarely requires you to give a health report. You do not even have to be employed. All you need is to pay the premium and you and your household structure or content are covered.