Black Friday. Yes please. Time to pick up that 85-inch plasma TV for a steal. And while we’re at it, let’s get a new side-by-side fridge-freezer too for a fraction of the normal price. The more you buy, the more you save, right?
But there’s a catch: make sure you insure your new prized possessions for their replacement value, or you could end up feeling blue.
In fact, under-insurance is a major problem in South Africa, and leads to huge unhappiness and financial loss when it comes to claim time, says Wynand van Vuuren, client experience partner at King Price Insurance.
Say you buy that fancy new TV for R10,000 on a Black Friday sale, and you proudly insure it for that amount. Problem is, the replacement value of that TV is the normal retail price, which could be double what you paid. If the TV is stolen, your insurer will pay out what you insured it for, less your excess amount, and this could end up being a lot less that what the TV is actually worth.
It’s not just sale goods that are under-insured, though. If you’re not assessing your home contents every year for their replacement value, you could find yourself with a massive shortfall if anything happens. That furniture you bought 10 years ago is going to cost a lot more than you paid for it, if it needs replacing. As an example, if you insure home contents worth R1 million for R500,000, you would only be paid 50% of any claim, even if you only claim for a couple of items.
“We always suggest updating your home inventory at least every year. The key here is to make sure you cover your home contents for their current replacement value – don’t guess. And remember, insurers can only protect what they know about. It helps to keep the original receipts for items like jewellery, laptops and big screen TVs, so that you can prove their value if you need to claim,” says Van Vuuren.
It’s not just big-ticket items that should be insured, though. You should have home contents cover for all your ‘loose’ items – anything that would fall out f you turned your home upside down.
You must also specify items that you take with you when you leave your property, under your portable possessions cover, or they’re effectively uninsured. These include your phone, laptop, jewellery, watches and sunglasses, clothing gym bag and its contents, and luggage, for example. To help you value your home contents correctly, here’s a handy home contents inventory.
Under-insurance is also a big problem when it comes to buildings cover. The bottom line: don’t insure your house for what it would sell for. Market value isn’t the same as replacement value. Work out what it would cost to rebuild your home from the ground up, including the boundary walls, solar panels, swimming pool, taps and tiles, and insure that amount. And, if you’ve made major improvements to your home, such as adding a new room, tell your insurer and update your sum insured, or you risk being underinsured.
