The tragic floods in KwaZulu-Natal (KZN), which claimed more than 440 lives and destroyed an estimated R12 billion of infrastructure, have highlighted a risk that South Africans cannot afford to ignore.
The risk is climate change, and, according to the United Nations’ recent IPCC Sixth Assessment Report (IP6AR), extreme weather events, which were once considered rare, are only going to become more common. In the latest World Property and Casualty Report, it was noted that global economic losses driven by climate change have spiked by 250% in the last three decades.
“An increase in extreme weather events like floods, fires and storms will have a massive financial impact on South Africans. Not only will it result in an increase in insurance premiums, but the cost of food, clothing and electricity will rise too,” says Bradley Du Chenne, CEO of insurance and financial product comparison site, Hippo.co.za.
While many insurers are involved in funding research to develop more effective, future-proof insurance solutions to respond to the increase in natural disasters, there are a number of things South Africans can do right now to protect themselves and their hard-earned assets.
Review your insurance policy at least once a year Look at the amount you’re currently covered for and then follow steps two to eight.
Beware of Under-Insurance About one in three South Africans with home contents insurance are under-insured and this has serious financial consequences. “Under-insurance occurs when there is a shortfall between the amount of cover selected and the actual replacement value of what is being insured. Unfortunately, there is a tendency among some people to under-insure their goods to save a bit of money on their monthly insurance premiums. Others are just not prudent when it comes to updating their policies and inventory lists. Either way, many only realise the consequences when they submit a claim and discover that their insurance will not cover the full costs of replacing whatever has been lost, stolen or damaged,” says Du Chenne.
Understand Replacement Value Your possessions should be insured at their replacement value. Replacement value is what it would cost you, at the time of a claim, to replace all your belongings with similar, brand-new ones.
Update your home inventory Ensure that you review and update your insurance policies as the replacement value of goods changes over time. If a policy is not reviewed and the higher replacement value is not considered, cover becomes inadequate.
Do some online pricing research or consult an expert This will help you determine the current replacement cost of items in your home. Make sure to be specific with the specs, especially when it comes to electronics, to ensure the prices you get are accurate.
Identify specialised items Specialised items may need specialised cover. Certain items like stamp and coin collections, photographic equipment, antiques and paintings may require specific cover, so check with your insurer as to which rules apply.
Get valuations done Certain items require valuations, so ensure that you have valuations done to prove the worth of jewellery and antiques in case of a claim.
Understand your cover: Make sure you fully understand your insurance portfolio, and what it will and won’t do for you. “For instance, there’s a difference between home contents insurance and buildings insurance. Buildings insurance covers you for structural damage, while home contents insurance focuses on the contents inside your home. Some of those contents – like laptops and cell phones – can be classified as portable possessions and may have their own standalone cover,” says Du Chenne.
“With the continued threat of severe weather, one simply cannot afford to be under-insured or worse, uninsured. On the other hand, avoid over-estimating replacement values because this will result in you being over-insured, and you will be throwing money away unnecessarily every month,” says Du Chenne.