There is an assumption that if you have a home contents insurance policy, you should be covered if any of your possessions are stolen,
damaged or lost, however people don't realise that if you do not insure your possessions at their replacement value, you might have pay a
lot to replace your possessions. Even if you had been paying your insurance premiums diligently every month. This is called under-insurance.
Under-insurance is when there is a shortfall between the amount of cover that is selected and the actual replacement value of that which
is insured. This happens a lot as a result of people trying to save money on their premiums by under-insuring their possessions. It also
happens quite often because people do not update their policies and inventory lists regularly. Unfortunately, many only realise what the
consequences are when they claim, and the insurance won't cover the whole claim.
The replacement value is what it would cost you to replace your lost, stolen or damaged possessions with new ones, at the time you would
submit a claim. If you submit a claim, your insurer will calculate the replacement value you should have insured yourself for. If you
insured your belongings for less than that, your insurer will only pay a part of your claim.
Most insurers use the following calculation when determining if the client is in fact under- insured:
Claim: R10 000
Insured For: R50 000
Replacement Value: R100 000 Under-Insurance Calculation: R10 000 X R50 000
R100 000
Claim Payment: R5 000
The replacement value of possessions changes over time, which is why it is important to review your policy. If the higher replacement
value is not taken into account, the cover will become inadequate. It is also important to update the household inventory list on a regular
basis to ensure that any new items are included and to remove items that that you no longer have. When updating your inventory, it is
important to make a realistic estimate of the true replacement value of the items on the list.
Underestimating the cost of replacing Intelsat in an effort to lower monthly premiums, could make you fall short when you need to make a
claim.
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