THE TRUE VALUE OF A HOUSEHOLD INVENTORY – An Everyday South African Example

On realising the importance of protecting your household possessions that you diligently built up over the past few years you decided to take out household contents insurance to cover the unforeseeable event (Housebreaking) that your personal risk management plan may not be able to absorb (i.e. Burglar Bars and Security Gates). At the time of taking up the cover you may have not been sure of the full replacement value of your household contents but estimate the minimum R150 000 should cover it.

Fast-forward a few months and you are burgled, the thieves got away with your LCD TV (R10 000) and some jewellery (4 items @ R5000 each and 2 items @ R15 000 each). The replacement value of the contents stolen was R 50 000 and the assessor (loss adjustor) quickly swiftly completes an inventory of the remaining goods in the residence, and asks that you supply him with the purchase proof for the TV as well as the jewellery evaluation certificates.

Fortunately you have the receipt for the TV, but you don’t have valuations for the jewellery. The replacement value of the remaining contents is officially calculated at R250 000, making the total contents true replacement value R300 000 (R250 000 + R50 000). Your insurer agrees to pay your claim but will apply the Pro-Rata Condition of Average, Onus of Proof of Ownership Clause and Jewellery Valuation Conditions common to most Household Contents insurance polices.

How the Settlement is Calculated:

Proof of Ownership: You were able to source the receipt for the TV, but not for the jewellery items. The TV will be considered at full replacement value of R10 000.

Jewellery Valuation Condition: In terms of the policy wording the each jewellery item is limited to a sum insured of R1500 if there is no current valuation certificate. Jewellery is considered at R9000 (6 items at R1500 each).

Pro-Rata Condition of Average: Your elected sum insured is far less than the actual replacement value, you are underinsured and the insurer applies the pro-rata condition of average to your claim as follows: Elected Sum Insured (R150 000) / Actual Replacement Value (R300 000) x Total Claim Amount (R19 000) = R9500 (Before the application of Excess). Once the excess is applied you may be settled with R9000 for a R50 000 loss.

The Solution:

Get an Insurer Approved Household Inventory done QUICKLY: Recent surveys have shown that approximately 90% of households are under insured and as shown in the example above the pro rata condition of average can really put a dent in your claim settlement. Reputable Insurers accept valuations provided by approved Inventory surveyors; this corrects underinsurance and the resultant pro-rata condition of average being applied, provided your sum insured is adjusted accordingly. Provided the inventory is up to date it also removes the proof of ownership requirement as reputable insurers do accept inventories as a proof of ownership.

All jewellery items valued at over R1500 need to be valued yearly and their certificates kept in a safe place (Scan and save them to the cloud or ask your broker to electronically store them). The cover for household contents is limited to those items contained in the residence and outbuildings, so high value items that you regularly take out the house you should be insured on an All Risks Basis.

The Cost:

The cost of an Inventory is for the clients account and usually based on a sliding scale depending on the total value of contents owned. For our example the cost was +_ R1000 for R300 000 worth of contents, which paled to the R41 000 financial loss in the example above.

Change the way you manage your household contents risk today.

Regards

JK