Between 5 -10% of South Africans with contents are generally underinsured by a large margin, a fact that could have far-reaching implications for policy holders and their families.
Sometimes policy holders simply forget to adjust their policies as they acquire new items or improve their home. For example, a home owner could add a large extension or install an expensive sound system but neglect to tell the insurer. However if these improvements or items are not added to the policy, the home owner is unfortunately not covered.
The event of under insurance occurs when your insured value is less than the value of your home or contents. In the event of a claim, your insurance policy pays out on a pro-rata basis and you will receive less than what it would cost to replace the lost items. While the policy will pay out some of the costs, you will have to partially fund the replacement of your possessions. If you are underinsured, you become your own insurer for the balance of the losses which will not be covered.
Johan van Greuning, Head of Standard Insurance Limited says “When you incur a loss, whether through a fire or theft, an insurance assessor will do a full inventory of all the remaining/surviving items in the house and then add the value of the lost/claimed items to the value of the remaining items to determine the “Actual replacement value at risk”. The “Total Sum insured” per your insurance policy will be compared to the full replacement value of all of the items in the house and not just high risk or expensive items such as TV’s, DVD’s and computers.
Mr van Greuning says “In addition to regularly checking your sum insured value to avoid underinsuring, it is important for home owners to keep the payment of their insurance premiums up to date to ensure consistent cover.” He says “There are an alarming number of home owners who never upgrade the sum insured value of their property and find themselves underinsured. We have also observed that home owners tend to let their policies lapse once they have paid up their home loans. This results in the insured suffering a loss to the full extent of the loss.”
“It helps to make reviewing your contents and policies a regular habit. You will be surprised at how much you have actually added to your household over a year that should be included to your policy. Not only will this ensure that you are covered adequately but could also help to avoid financial stress at a later stage. This list will also be valuable if you need to claim,” says Mr van Greuning.
25 July 2014