This article first appeared in Personal Finance Magazine, 4th quarter 2017
If you are planning a family holiday, or even if you are going on a solo trip, you probably already know, or have some idea, what your holiday is going to cost you. However, have you considered whether the contents of your home is adequately insured while you are away, or what it will cost if it isn’t?
Checking your insurance policy before you set off could save you a lot of money. If you are short on cover, the time to change that is now, and it would be in your best interest to get advice from your insurance broker as soon as possible, or contact your insurer directly, to get your insurance holiday-proofed.
Perhaps you think you are covered because you have insurance in place, but is it to the right value? If you are underinsured and need to claim, you may be disappointed by how little your insurer will pay out. The payout is calculated according to what insurers call the average principle or clause.
For example, if the total replacement value of your household contents is R100 000 and you are insured only up to R80 000, it will mean that only 80 percent (R80 000 divided by R100 000, expressed as a percentage) of your claim will be settled.
Practically, this means that if you have a burglary over the holiday while you are away, and your loss is R50 000, as assessed by the assessor of the insurer, then the insurer will pay you only 80 percent of the R50 000, or R40 000, and you will incur a loss of R10 000. These are low figures, as many households have contents worth considerably more than R100 000.
Imagine if your home was literally turned upside down – everything that would fall is considered contents. Now imagine if you had to replace all of that. Many items will have increased in value due to inflation, so being adequately insured for their fair replacement value is crucial.
It is easy to avoid falling into the trap of not having adequate insurance, or insuring “selectively”, just to save on your insurance premiums, but it could end up costing you more in the end.
Don’t forget that your all-risk cover, which is typically tied to your house contents policy and covers items you take with you when you leave the house, such as cameras, jewellery, cellphones and laptops, must also be adequate.
If you are leaving your home unattended, be it just for a few hours or a few days, make sure that all your security features as stipulated in your insurance policy are in working order and in use. If your security gate isn’t locked, for example, it is unlikely that your claim will be settled. If your insurer requires that you have an alarm, make sure it is activated before leaving.
Where possible, have someone occupy your home, or at least have a trusted friend or neighbour pick up your mail, to avoid having your home appear uninhabited.
Lock away expensive items and make sure your windows are closed and your doors are locked. Whatever you can do to deter criminals is good practice, but, most importantly, make sure you comply with all the security requirements in accordance with your policy. Not doing so could mean your holiday ends up being much more expensive than you planned.
Riana Wiese is an insurance adviser at PSG Meesterplan and PSG Insure’s Adviser of the Year.
- PERSONAL FINANCE ONLINE