Aon Insurance Warns Against Underinsurance

May 13 - Despite the fact that South Africa is one of the countries most exposed to crime that includes theft, carjacking and burglary, a whopping 40% of all policyholders are underinsured, according to the latest industry figures.

And while it is very tempting to cut back on insurance cover due to budgetary restraints, Aon Risk Solutions warns that South Africans should hang on to their existing cover and ensure that they are not underinsured.

"It's scary that frequently, it's not just a matter of home theatres, Raybans, clothes and the like being under-insured," said Mandy Barrett, speaking for Aon.

"As serious as that may be, often major possessions such as cars, household possessions and property are not properly covered either and the situation could be getting worse as consumers seek to off-set rising transport, electricity and other day to day cost of living expenses."

Barrett said that this means that, in an event of a claim, policyholders will only be paid out partially for their losses.

Homes are Also Underinsured

It is also likely that many South Africans' homes are underinsured. Barrett gave the example of a home that was bought 15 years ago for R500K. The replacement value for such a home, with the increase in building costs taken into account, could be R2,500,000.

"If the sum insured is not increased to reflect this increase, the underinsured component could be as much as R2 million," she said.

Tips to Avoid Underinsurance

• Customers should insure the entire contents of their homes.

• Insurable goods should be revalued every year.

• Insurance should be at replacement value.

• Remember to add new purchases to insurance policies.

• A broker will be able to negotiate the best deals, especially if a number of insurance policies are taken out with the same company.

• Don't forget to insure works of art, curtaining, designer clothes and other items that we may overlook, but will be very difficult to replace if necessary.