Insure your bond; or lose your home

It may not be legally compulsory, but you should always take out a life insurance policy when a bond is granted for a home — and it should be large enough to cover the full outstanding sum owed on your home.

According to Lanice Steward, MD of Anne Porter Knight Frank, "We have in our business too often seen a young wife or husband with children having to move out soon after the spouse has died because sums were still owing on the home which they could not pay.

"This can add greatly to the shock and trauma of the death."

Could be cheap

If the policy is payable only in the event of death and carries no endowment clauses it will be reasonably inexpensive. Insurance cover for a R500 000 bond awarded to a 40-year old male in reasonable health might cost somewhere between R300 and R400 per month.

A younger person could pay some R250 per month.

Sometimes the insurance policy is linked to the bond and falls away, without the insured realising it, when the bond is cancelled. This can also happen with fire and storm insurance. In those cases, it is possible to keep the policy going even though the bond is paid up.

According to Steward, it pays to shop around when you're looking for a policy.

Study the fine print

Moreover, before you sign, study the fine print carefully because apparently excellent policies can contain tricky exclusion clauses which greatly reduce their value.

Steward uses an example of a home owner killed while climbing a safe part on Table Mountain. According to the insurers, although no ropes or pitons were in use, the activity was classed as 'mountain climbing', not 'mountain walking' and therefore the insurance company refused to pay out as mountain climbing was listed in their policy as a dangerous activity.

Similarly, certain diseases of which you may be completely unaware and which may not be picked up at your original health inspection can also nullify the payment if it is found later to have caused death.

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