Young professionals on their starter salaries tend to share the cost of living expenses by splitting rent and other monthly expenses with their peers. Sharing the cost of rent is a cost-effective exercise; however, this thrifty arrangement can complicate matters when taking out or lodging an insurance claim.
“Rental agreements and insurance can be overwhelming, perhaps even more so to a graduate living away from home for the first time,” says Vera Nagtegaal, the Executive Head of Hippo.co.za. “But, it’s worth doing the research to understand these quintessential ‘adulting’ problems because you might not have the right cover when you need it most.”
She suggests that the first step is to understand the different types of insurance cover for your home and its contents, as these determine where the responsibilities lie. “It’s something they don’t teach you at school, so it’s worth doing the research.”
Home contents cover
Home contents cover or household insurance usually offers cover for items such as electric appliances and furniture kept and utilised inside the property. If you’re sharing a home or apartment, be sure to first check whether your insurer will offer home contents cover for commune living.
Nagtegaal says this type of insurance is taken out by the tenant. But, if there are items in the house that belong to the owner – such as a fridge or washing machine – the responsibility for their maintenance and insurance should ideally be covered in the rental agreement.
Homeowners’ insurance, building or property insurance covers the structure of the home and any permanent fixtures and fittings that form part of the building. “The homeowner is usually responsible for taking out this kind of insurance, and the tenant should ensure that such cover is in place when taking out a lease,” explains Nagtegaal.
“A word of caution, though. If the tenant damages the permanent fittings and fixtures through causes not stipulated in the policy, they could be held liable for the damages,” says Nagtegaal. “For instance, if there was flood damage as the result of a bath being left running, the homeowners’ insurance could potentially not cover that, and the tenant might have to pay up.”
For this reason, Nagtegaal recommends that tenants ask to see the policy when they sign the lease so that they know what their areas of risk are.
Where the rent-sharers stand
Rental prices are on the rise. The PayProp Rental Index Annual Review for 2017 showed that average rents were up to R7 308 nationally – up from R6 934 in 2016. With these rates steadily increasing, young people entering the housing market for the first time are opting to share homes by splitting the rent or subletting. These are cost-effective solutions to the rent problem but can cause uncertainty when it comes to insurance.
So, what happens in the case of a shared rental? “Firstly, a tenant must ensure that the rental agreement allows for subletting before bringing a new person into the home,” says Nagtegaal. If there are two tenants, or one tenant and a subletter, they should take out separate policies, or share a single policy with full disclosure about the ownership split of the contents.
“Whichever way you approach the household insurance split, be sure to be completely honest with your insurance company to ensure you get the correct policy for your needs,” says Nagtegaal. “Disclose everything so that if a dispute arises, you have proof that you were honest from the get-go.”
Nagtegaal adds that failure to honestly disclose all the details of a rental arrangement could result in a claim being rejected and could end up in a fraud charge if the insurer was intentionally misled.
“Insurance is an extremely useful financial tool that protects you from some of the risks associated with modern living arrangements, but it must be used honestly and appropriately,” concludes Nagtegaal.
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