Avoid underinsurance – update your cover
As the Rand continues to weaken against major international currencies and inflation and rising replacement costs for foreign goods rise, you could be at the risk of underinsurance. Several factors affect your insurance rates and could influence the value of items over time.
Insure your possessions for their replacement value
When the market is unstable, you should value your insured possessions regularly to make sure the items can be replaced at their current value. It’s suggested that possessions should be valued every calendar quarter, especially after major fluctuations in the Rand for high-value items in particular.
The following examples show how market instability impacts the replacement cost of items:
Household contents:
| Item | Cost | Price in January 2016 |
|---|---|---|
| Samsung 660l side-by-side fridge/freezer |
R10 800 (in June 2014) | R14 000 |
Portable possessions:
| Item | Cost | Price in January 2016 |
|---|---|---|
| Citizen Eco-Drive dress watch | R3 950 (in April 2015) | R6 060 |
| Nikon D7100 Camera | R10 400 (in October 2014) | R19 900 |
It is crucial that your household contents are insured for the cost of their replacement. If you don’t have these items insured for the replacement cost, an average will apply when you claim. This means that your assets are insured for less than their full value and you, as the insured client, will have to bear a portion of the loss. For example, if the correct replacement value of your household contents is R600 000 and you have insured it for R300 000 and have a loss of R100 000, you will only be compensated for 50% of your loss (or R50 000).
For this reason it’s vital that your possessions are insured for their replacement value. If you are not sure how to insure your items for their replacement value, use these resources to help you work out the appropriate amount to insure your items for:
- An inventory assessment
- Discuss your cover with your financial adviser.
Make sure you don’t have to pay in extra money to replace your items – check your Plan Schedule and update your insurance cover according to the replacement value of your household contents and portable possessions. You can update your cover by contacting your financial adviser or by emailing us at insuremaintenance@discovery.co.za.
Find your Plan Schedule online
Your Plan Schedule, as well as your Plan Guide, Benefit Limit Annexure and Excess Annexure, is available on www.discovery.co.za in Important Documents after you have logged in.
