Updating insurance policies whilst you have the time could be the best thing you do during lockdown

In the current lockdown, most people have a lot more time on their hands than usual and are using the time to tackle neglected admin tasks, but one that we often forget about is insurance which needs to be updated regularly, especially our building and household policies.

“Home owners grudgingly fork out for insurance every month consoling themselves that at least if something does happen, they are covered, but many don’t realise that they are, in fact, underinsured and unfortunately most will only find out once it's too late,” Says Chris Cilliers, CEO and Co-Principal of Lew Geffen Sotheby’s International Realty in the Winelands.

“This is especially common among older home owners who have often not have updated their insurance policies in many years and, as they are often on a fixed income from pension by then, it can be financially crippling if not devastating when the pay-out falls far short of the replacement value.

“The elderly often have no idea how much their homes are worth as they probably paid about R50,000 for it in the 40 years ago and, as they are convinced that they are going out feet first, they are ill-prepared for something like fire.”

She adds that whilst there is a mortgage, banks ensure that there is insurance in place for at least the amount of the bond, but once the bond has been repaid, many home owners forget to keep their eye on the ball in this aspect.

“It is important that owners understand that they need to adequately insure for the replacement value of the building, not just the market value, plus all the contents and they must specify items that are valuable.”

Frans Labuschagne, Director of Cape Town-based insurance brokerage, FJL Consultants, agrees and cautions that home owners should also take the time to do their homework and ensure they have a policy that best suits their needs and situation.

“Although the standard cover for all insurance is basically the same, each and every insurer and underwriter differs to a degree, with different bells and whistles on offer and certain policies may, therefore, suit your unique needs better than others.

“The way claims are settled also differs from company to company as some adhere strictly to their underwriting, whereas others are more flexible and open to negotiation where possible.

“And many people don’t realise that to be adequately insured, the following elements must be accurately valued: fixtures and fittings, fixed recreational and ornamental structures, paved and surfaced areas of brick, concrete, asphalt, synthetic grass or stone (not gravel), boundary and other walls, gate posts and gates including all their mechanisms and fences.”

He adds that home owners must always take the natural environment of their home into account when they insure their homes.

“If you live in an area known to be a higher risk for fires or near or where flooding has occurred before, it’s essential to have adequate insurance cover in place to ensure that financial losses are mitigated.

“After enduring a traumatic experience like seeing your home and all your possessions going up in flames, the last thing you need is to face hefty bills and financial strain because of inadequate insurance.”

“And, depending on the municipality and the nature of the fire, you may be subjected to a fee for the employment of fire personnel and resources that were used to put out a fire at a private residence.

“It’s therefore important to be aware of what services are covered in your area and what you may be expected to pay for, especially if you don’t have adequate insurance cover in place.”

Cilliers says underinsurance also often occurs because people mistakenly think that a home should be insured for its market or sale value, but in order to cover all eventualities it should actually be insured for its replacement value; that is, the cost of rebuilding the property to its original condition.

“The same applies to household contents insurance. Household items and valuables must be insured for their replacement value - not what you originally paid for them. For this reason, it’s important to update your policy at least once a year, and ensure everything is covered.”

She reminds us to keep important documents such as IDs, passports and insurance policies in a safe place as it’s traumatic enough dealing with the trauma of a burglary or an event like a fire, and the last thing you need is someone using your identity for nefarious purposes.

“It’s also a good idea to have the emergency contact numbers on hand and to know who to contact in the event of an emergency situation as a quick response can significantly limit the damage.

“No-one wants to dwell on unpleasant events that may never, ever happen but being well-prepared for any eventuality is not only sensible; it affords you peace of mind, allowing you to get on with life with one less thing to worry about.” 

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