Catastrophe! Will your finances survive?

There are things in life that none of us can predict, so we try to be as prepared as possible – in case a catastrophe does head our way. We insure our properties, cars, and most valuable items for an agreed-upon monthly premium – a great start, but are you certain that your insurance is sufficient to fully cover your losses should the inevitable happen? You might think the answer is yes, but according to Jannet Ferguson, General Manager: Technical Rest of Africa and Intermediated Business, most people only realize that their cover isn’t sufficient once it’s too late.

“One of the biggest things I see is underinsurance on property and incorrect or incomplete insurance,” she says. This means that all of the details on the insurance cover – whether it’s for your home, car, phone or other personal belongings – aren’t specified from the start or haven’t been updated regularly. “Incorrect or incomplete information can drastically affect a claim, resulting in a settlement that’s much less than anticipated, or even a non-settlement.”

So, how do you ensure that this doesn’t happen to you? According to Ferguson, it’s a good idea to reassess your insurance cover yearly, and ensure that you’re covered for things such as fire and floods. “If you’re underinsured you’ll only receive a percentage of the claim – which means that you end up losing money and, in some cases, won’t be able to replace or fully repair the damage.” For example, underinsurance occurs when  your property is insured for R1 000 000, butthe cost of replacing your property at time of loss is R1 500 000. The R1 000 000 insured value is below the cost to replace your property – so at the time of claim, the claim settlement  paid by your insurance will be R1 000 000.

Many customers also try to use their cover for maintenance – especially on their homes or other properties. “As an example, many people don’t maintain their roofs, so when it eventually collapses or starts leaking they put in a claim. What happens, most of the time, is we find that they haven’t maintained their roof so the claim won’t be paid out. The same goes for car accidents. If you’re involved in an accident and the cause is directly linked to the negligence or lack of maintenance – for instance, worn out tyres – there will be no payout.”

Now that you’re aware of the most common mistakes, here are a few other things to look out for on your insurance policies to ensure that you don’t end up losing out when catastrophe hits:

• Insure your property for the build cost, not the retail value and, if you’re unsure of what this is, get a contractor or insurer to evaluate the property for you.
• Insure your vehicle for the retail value, not the market value, otherwise you won’t be able to replace it with the same car, should something happen. Too much jargon? See our infographic below, where we unpack these terms.
• Be sure to comply with installation guidelines set out by your policy, whether it be alarm installation on your property or fitting a tracker in your vehicle. For example, if a tracking device is a requirement for your vehicle and it is not fitted, at time of theft, it will impact your claim negatively.
• Don’t take out an unrealistically high excess just to pay a bit less on your monthly premium. If you’re unable to pay a higher instalment, you won’t be able to cover the excess.

Confused by insurance claims? Here are definitions of the most commonly used terms: