Global Crisis Impacts Insurance Claims
The global economic meltdown has, in same way or another, had a negative impact on most South African companies. The implications on your insurance contract are far reaching given that the new replacement cost of plant and machinery has soared northwards due to severe currency fluctuations and increased import costs. The end result is that you are most probably significantly Underinsured if your asset sums insured have not been adjusted accordingly. So what is Underinsurance and why would you be underinsured if you have not reviewed your sums insured recently? Underinsurance is a contractual penalty insurers impose for not insuring for the correct full value (VAT inclusive) as stipulated in your insurance contract. Full Value (in most short term insurance policies) equates to the New Replacement Value VAT inclusive, of the insured property, delivered to your premises. For example, you insure the plant and machinery of your business for R5 000 000 and it is determined by insurers, at claim stage, that the correct full value should have been R10 000 000. The ratio of the sum insured to the full value at risk is 50%. In this example insurers will deduct 50% for underinsurance in the event of a claim - a frightening proposition for any business! Chadwicks recommends a professional evaluation of all insured assets. This not only produces an accurate sum insured, but may also highlight property you may specifically want to exclude from your sum insured (insurers would then exclude this property in your policy contract and from claims, which then obviates potential underinsurance complications). Of course, the increased sums insured will lead to increased premiums. Chadwicks has mechanisms and the technical know-how to mitigate these increased costs, without your business running the risk of being exposed to Underinsurance.
