22 Jun ARE YOU UNDER-INSURED?
As you may have seen in the media, worldwide inflation has become a significant challenge. We are seeing inflation levels in many parts of the world not seen in decades. This inflation is caused by a number of factors: some of these include the enormous liquidity expansion in the developed world during and after Covid, supply shortages due to the continuing lockdown in China, and the impact of the war in Ukraine on oil, grain and other commodity prices.
As we are part of the developing world, the effects of these worldwide price increases on all sectors of the South African economy will be significant and long-lasting. These include the building and retail sectors, where the effects have been compounded by the increase in demand for building materials and goods caused by the recent catastrophic floods in KwaZulu-Natal.
Bennie Boshoff, GM of Safire Insurance Division, says, “The recent flooding and weather-related damage, especially along the KZN coastline, has resulted in a significant increase in claims, coupled with steep increases in building costs. This has a direct effect on policyholders: what six months ago may have been a sufficient sum insured for one’s property may now be insufficient. In the event that a property-owner is underinsured, they may be financially responsible for a portion of the costs incurred in restoring the property to its original state.”
It is not only construction costs that have seen a steep increase: the price of household goods has also seen a major upturn. So to replace items such as TVs, microwaves, furniture etc could also potentially cost more than anticipated.
Several measures are advised to protect our clients in the event of a loss:
- Reassess the potential building replacement costs in line with the current Building Material Index. When insurers talk about the ‘building sum insured’, this refers to the estimated cost of rebuilding your home, not its market value. Your property should always be insured for the rebuild sum.
- Compile a list of the more costly household items that you would need to replace in the event that your property was damaged / destroyed. Do an online check on prices to ensure you are adequately covered.
- Does your policy include the cost of removing the remains of any damaged / destroyed buildings
We would recommend that all policyholders conduct this exercise as soon as possible to ensure that their current sums insured are adequate. It is further advisable that these values be reassessed regularly and that sums insured be updated annually to allow for inflation and to ensure that insurance cover is kept up to date.
Please do not hesitate to contact your Safire-approved broker to ask for assistance to ensure that your home, business, and contents are properly covered.