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Here’s a true story…and a valuable lesson for us all!
Recently Brendan got a call from one of our household insurance clients.
Client: Hi Brendan, I’ve just been robbed!
Brendan: Are you OK? What happened?
Client: I’m fine. I woke up from an afternoon nap only to find a bunch of guys in my home. They took all my jewellery. How do I go about claiming?
Brendan: No problem! I’ll send you the household insurance claim form…How much jewellery are we talking about here?
Client: Oh, I reckon it’s easily R100, 000!
Brendan: Shew, I didn’t know you had that much! Do you have valuation certificates for all these items?
Client: No, why?
Now first things first!
It’s not the first time we’ve asked household insurance clients to please send us inventories and valuation certificates for jewellery. Truth be told – the vast majority of our email correspondence regarding this type of thing is simply ignored…
…Heck Brendan, I’m just too busy right now! I’ll try and get the valuation done this weekend…I promise!
Sound familiar?
No valuations on jewellery means that neither the client or us have a leg to stand on when it comes time to handling the household insurance claim!
Insurer: Mr. Els, can you provide us with either invoices or the valuation certificates for the jewellery?
Brendan: Uh, can I get back to you on that one…?
Which brings us to problem number two…!
The client’s household contents for insurance purposes was only insured for R200, 000.
Insurer: Mr. Els, are you sure that the jewellery was worth R100, 000? The reason we’re asking is because the client is only insured for R200, 000. We’ll have to send an assessor out.
Brendan: What can I say guys?
Now here’s the strange thing…
This client lives in an upmarket high security complex. Not only that, but he lives on the second floor!
So what are the odds on being robbed in broad daylight in a security complex? Next to none, right?
Now we happen to know the client was speaking the truth about the jewellery…simply because he made a sworn statement to that effect at his local police station!
The problem comes in with not understanding how household insurance works…
Ag, I’m insured for R200, 000 which is double the value of the jewellery I own. I never wear all the jewellery when I go out, and anyway, what’s the chance of being robbed in the complex? I’ll just insure my household goods in the meantime!
Six months later and short term insurance is the last thing on his mind…until of course, it came time to claim.
So what eventually happened to the insurance claim?
Well, as you know by now, our client submitted an insurance claim for R100, 000.
An assessor was duly sent out and completed an inventory of the client’s household goods.
At the same time he obtained a replacement quote for all the stolen jewellery.
Here were his findings…
- Value of all household goods at replacement value – R320, 000
- Value of the clients actual claim – R100, 000
- Quotation for replacement of jewellery – R25, 816
And here’s what the insurance company did…
They laid out the claim in a table format similar to what you see below. Then they considered whether there was any proof of values…and decided to discount the quoted amount even further! It went something like this…
| Item/Description | Proof | Claimed | Quote | Settlement |
|---|---|---|---|---|
| 18 ct necklace | None | 30, 000 | 12, 370 | 5, 000 |
| White pearl earrings | None | 2, 000 | 800 | 800 |
| 9 ct dia penchant | None | 40, 000 | 9, 672 | 5, 000 |
| Dia ring | None | 20, 000 | 0 | 5, 000 |
| 18 ct bracelet | None | 8, 000 | 2, 974 | 2, 974 |
| Totals | 100, 000 | 25, 816 | 18, 774 |
So what was eventually paid out..?
R18, 774..?
But hang on a moment…the insurer did have one more ‘trick’ up it’s sleeve.
You see, all this time our client had been completely under-insured with his household insurance!For years he had lived under the illusion of being fully insured simply because he paid his premiums. In the meantime the cost of replacing furniture and jewellery had steadily crept up and up…
Suddenly – out of the blue – he had a claim for R100, 000!
The insurer said (as they always do, don’t they?): Hang on mate, all this time you’ve been under insured. In our book that makes you self insured. Congratulations, you get to pick up a portion of the tab!
The insurer then applied ‘average’ which was calculated as follows:
- Sum insured – R200, 000
- Value of household goods at replacement value – R320, 000
- Settlement amount – R18, 774
Here’s how it’s actually calculated…
R200, 000 divided by R320, 000 multiplied by R18, 774 = R11, 733
| Total Claim | R11, 733 |
| Less Excess | R500 |
| Total Payable | R11, 233 |
So are insurance companies thieves?
As you can see from this example…NO!
In fact they were under no obligation to pay anything at all since our client could not provide proof of ownership. However, they were willing to reach a middle ground.
The problem arose when our client simply ignored our repeated requests to prepare an inventory based on the replacement value of his household goods…and to provide us with valuation certificates/invoices for all jewellery.
So here’s the takeaway for everyone who has – or who’s contemplating – taking out household insurance…
- Download an inventory sheet courtesy of our partners.
- Do a full inventory of everything you own at replacement value. Remember if you’re afraid that the premiums will become too expensive, why not accept a bigger excess in lieu of higher premiums?
- Forward the inventory to your insurance company the very next day.
- Finally…Go to the right hand side of this article (to the ‘subscribe via email’ block) and enter your First name and valid email address. Click on the ‘subscribe’ button and not only will we give you access to our e-book on life insurance…we’ll also provide you with a monthly dose of rock solid information you can use. And that you can take to the bank!
Look after yourself
Till later…
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{ 2 comments }
Life contains all the risk.It's all up to us if we handle all our risk positively. We work have to earn, to acquire valuable things and properties and save for the future.With all that one of the major saving to can invest is through availing timely insurances.Try to visit our site for more…Thanks for the plug in.
Hello,
Good point you make about risk management!
Consider an average family who spend R500 per month on their household
contents insurance.
That's R6, 000 a year – R60, 000 over ten years – R120, 000 over twenty
years!
Why waste this amount of money if you have no intention of making certain
that you're insured correctly?
For those concerned about premiums being too expensive…why not consider a
higher excess?
Thanks for the comment!
Lawrence
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