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Are your irreplaceable goods worth insuring?

Personal Finance
Household items that are special to you, which you may have inherited, received as gifts, or collected over time, may present something of a dilemma when it comes to insurance. Would you replace them if they were destroyed or stolen? How much would it cost to replace them? If you insured them, would their replacement value push up your overall insured value, and hence make your premiums unaffordable? Could you save on insurance costs by excluding them from your cover?

If you have not made an alternative arrangement with an insurer, the item will, by default, fall under your household contents policy, and it may or may not be covered thereunder, depending on the terms and conditions. It may also push up the overall replacement value of your contents to the extent that you are underinsured.

A book collection is a good example of the dilemma you might face. You own a few hundred books, for example - an assortment of coffee-table books, old textbooks, do-it-yourself guides and paperback novels, some of which you picked up second-hand for a mere R20 or R30, but some of which were expensive when bought new, costing many hundreds of rands. In all probability, you will not read most of them again, but they look good adorning your study wall.

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If these books were destroyed in a fire, would you try to replace them? Probably not, although over time you might build up a similar collection. Would you want to be paid out for them? That would probably depend on what you paid to insure them.

Don’t forget, that, unlike with car insurance, householder’s insurance covers you for replacing your lost goods with new goods, off the shelf. So your book collection that cost you perhaps R30 000 in today’s rands, may have to be insured for R200 000 or more.

Or what about a handful of pieces of antique jewellery inherited from a great aunt? They may have a high resale value in today’s market, but are you prepared to insure the jewellery for such an amount?

It’s items such as these, which may be of great sentimental value to you while you possess them, but which you would not bother replacing - or find it very difficult to replace - if they were lost, that you might like to exclude from your household cover.

Insurers generally don’t like you being selective about what to insure and what not to insure under your household contents. Their policies are designed to cover a mix of higher-risk and lower-risk, and higher-value and lower-value, items. You couldn’t decide to exclude your bed, for example.

Natasha Kawulesar, the head of client relations at Outsurance, says: “Our premium is calculated on a mix of low- and high-risk items in the sum insured, so removing low-risk items would not necessarily give the client the financial benefit they expected. We therefore do not provide for selective covering of only certain contents items under contents cover. We do, however, give you the choice of whether you would like to insure your jewellery items under your contents cover or would rather have that excluded from cover.”

Most insurers will, however, consider a request to exclude special, irreplaceable items from your cover.

Attie Blaauw, the head of personal lines underwriting at Santam, says: “The decision to insure collectables and heirlooms should be evaluated on your ability to make up the financial loss should such an incident occur. Unfortunately, insurers do not appraise items based on sentimental value, but on replacement value.

“If you feel that an item of sentimental value is not replaceable, Santam would allow you to exclude items of this nature. Book collections, a piano, jewellery, clothing and artwork typically fall in this category. These items would be excluded from the household contents section on the policy, as well as from the corresponding insured amount,” Blaauw says.

Outsurance does “consider requests to exclude out-of-the-norm items from contents cover, such an expensive art collection or expensive collection of books”, Kawulesar says . However, she says, this is outside the mandate of its call-centre advisers, to whom you would speak when buying cover. Such a request, Kawulesar says, “would need to be referred to our underwriting department for it to be approved. Should we accede to the request, we would endorse the cover to advise of the exclusion.”

Kawulesar suggests that, if you have special items or collections that you want excluded, you provide the call-centre adviser with full information about them, and the adviser will refer the information to Outsurance’s underwriting department. The adviser will keep in contact with you on the outcome.

IF YOU DECIDE TO INSURE

Certain special, high-value items should be insured, because they form part of your accumulated wealth, Bertus Visser, the chief executive of distribution at PSG Insure, says. And they may need to be specified in your householder’s or all-risks policy,

Works of art. If you have valuable paintings or sculptures, you need proof of ownership and value. For this reason, you would need to obtain a professional valuation for insurance purposes.

Collections. Stamp collecting is a good example of a hobby where the accumulative value of what you have bought over many years can become substantial over time. Visser says you should have your collection valued from time to time in light of new additions, and update your insurance cover accordingly.

Gold coins. If you own Krugerrands, you are required to have a certificate of ownership, and they may have to be specified on your policy. In the event of a claim, you may recover the loss only in line with the prevailing gold price.

Antiques and heirlooms. It is worthwhile to have these items valued so they can be accurately accounted for in your contents cover, and some may need to be specified, Visser says.

Pricey jewellery and accessories. Jewellery and expensive clothing accessories are often worn outside of the home and may need to be specified under your all-risks insurance cover. If you carry expensive perfume, make-up or other valuables in your handbag, the handbag and its contents need to be sufficiently covered. “Most policies provide limited handbag cover, so if you are carrying around high-value items that exceed this cover, you will need increase the sum insured,” Visser says. The same can be said for expensive watches, for example, or cufflinks: make sure they are covered for their correct replacement value and are specified in your policy if required.

Firearms. “These will also need to be specified, along with ammunition, loading equipment and scopes,” Visser says. “The accessory items are often even more expensive than the firearm itself, and you should therefore also take their value into account.” In the event of a claim, you will need to provide a copy of your firearm licence, which must be kept up to date. Make sure you adhere to the requirements in your policy regarding having a home safe, because they could differ among insurers.

“If you are unsure about the state of cover for any of your special possessions, or have other valuables that might need to be specified in your policy, chat to your adviser or broker,” Visser says.

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