What does replacement value mean?
The replacement value of goods is what it would cost you to replace all your belongings with similar brand-new ones at the time of a claim. When you submit a claim, your insurer will calculate the replacement value you should have insured yourself for. If you have insured your belongings for less than this amount, your insurer will only pay a part of your claim and you will be responsible for the difference.
What is insurable interest?
To have an insurable interest in an item, you would stand to suffer direct, measurable, financial loss if the item were lost, damaged or destroyed. For example, if your TV set to the value of R2 000 has been stolen from your home, as the owner of the TV you would have suffered a measurable loss of R2 000 due to your having a financial (insurable) interest in the TV set.
What does it mean to be under-insured?
Under-insurance means you don't have adequate insurance to cover the full replacement value of the assets you have insured. For example, let’s say you’ve insured your household contents for R80 000 and your house is broken into. Goods with a replacement value of R30 000 are stolen, which you claim under your home insurance policy with Old Mutual Insure. Following an assessment, it is found that the current replacement value of your total household goods before the theft was actually R100 000 and not R80 000 as insured. This means that you were under-insured by 20% and only 80% of your claim will be paid, i.e. R24 000 and not the R30 000 claimed.
Why do I have to pay an excess if I claim?
An excess (also known as a deductible or first amount payable) is essentially an underwriting fee charged to minimise the number of small administratively expensive claims, or to reduce a loss ratio, and to impose a duty of care on the insured. Excesses are usually charged either as a percentage of a claim, or as a fixed amount. For example, if you lose your watch, valued at R800, and the excess applicable is R200, the claim will be settled in the amount of R600. However, if a burst pipe results in damage of R375 to a ceiling and the excess applicable is R500, the cost would be for your own account due to it being less than the R500 excess.