Banks to remind clients of their insurance obligations

In line with a recent change to the banking industry’s code of practice, banks are now required to remind mortgage holders of their insurance obligations on a yearly basis.

Although the majority of homeowners do have insurance, there is still a small percentage who remain uninsured, putting themselves – and their mortgagees – at significant financial risk.

Under the terms of home loan contracts, mortgage holders are required to hold adequate insurance cover on their property, however banks rarely follow up their clients’ adherence to this obligation after the initial year. The new banking code has now put the onus back onto the banks to prompt their clients to maintain adequate insurance cover.

Banks will also explain the risks of underinsurance, in an attempt to reduce its disastrous effects, highlighted by the spate of natural disasters in recent years.