Check the terms of your insurance policies to avoid nasty surprises
Now that the worst of the recession is behind us, it is even more important that you review your short-ter m insurance policies regularly, because you face receiving only a partial payout or having your claim rejected if your policy is not up to date with, for example, the insured value of your possessions.
Debbie Barret, the general manager of marketing at First National Bank (FNB) Insurance Brokers, says many consumers are still under pressure following the recession and “may be tempted into false economies by failing to review their policies”.
To guard against costly surprises, FNB Insurance Brokers advises that you review your policies and pay particular attention to any restrictions and exclusions. Barret says the “grey areas” include:
Personal belongings. Barret says under-insurance is a major problem. You should regularly review your policies and the value of your insured items to take account of inflation.
For example, if you bought a TV set five years ago for R3 000, a similar replacement today would cost far more than R3 000, and you need to update your cover accordingly. If you fail to do this, you risk a partial settlement of your claim. For example, if you took out cover for R250 000 on your personal possessions and the insurer finds that your possessions were actually worth R500 000, the insurer is likely to apply the rule of average and will pay you only 50 percent of your claim.
You should do an annual inventory of your insured items – your insurer can refer you to a valuer for this purpose and, in some cases, your insurer will pay the valuer’s costs.
All-risks cover. This cover applies to personal portable items. You may assume that cover for such items is included automatically in your household contents insurance. However, you should specify expensive items, such as laptop computers and cellphones, under your all-risks cover, because the maximum allrisk amount may not be sufficient to cover the replacement cost of the individual items. You should also specify your jewellery and expensive branded goods, such as designer handbags.
Home damage. Full homeowner’s insurance is far from automatic. You have a duty to ensure that you maintain your property. For example, if you fail to maintain your roof and allow your gutters and down-pipes to clog up, a claim for rainwater damage may be repudiated.
Car value. You should check the value for which your vehicle is insured. If it is insured for market value, the insured amount should decrease each year as your car’s market value decreases and your premiums may increase less dramatically. Your insurer will increase your premiums to a certain extent to cover the contingency of a motor vehicle accident where your car needs to be repaired.
If your car is insured for its replacement value, the insured value is unlikely to decrease each year but will be adjusted by the insurer for inflation.
Car hire. In terms of your policy, free car hire may be available following an accident, theft or hijacking, but there may be exclusions or restrictions. For example, you may have free car hire only if you use a particular car hire company or you may be restricted to only five days of free hire. So, you may not have the blanket cover you assumed.