Content or household insurance covers the contents of your home against loss or damage to an extent outlined in your policy document. Garage or storeroom contents and equipment as well as outdoor furniture could also be included subject to various conditions.

The escalating crime rate in South Africa has a two-fold impact on household insurance. Firstly, it makes the cover virtually essential, and, secondly, it makes it very expensive. So, how much do you need, and do the returns justify the expense?

How much is enough?

How much insurance do you need? The catch here is that you cover everything, or nothing, and everything must be listed at its replacement value, even the old chair you bought for a song at the auction rooms.

Replacement value is what it would cost you to replace all your belongings with similar brand new ones at the time the claim is submitted. The value you place on your household contents is the limit the insurance company will pay out, presuming everything in your home is lost, damaged or stolen, less, of course, any excess you have to pay.

If you under-insure your goods and subsequently lose a few valuable items the assessor will calculate the amount owing to you on the basis of the full amount insured. So, for example, if you value the contents of your home at R50 000 and the assessor puts the value at R100 000, you will receive only 50% of the amount you have claimed – less the excess due.

Unfortunately you can’t win either way, because if you over-insure it just costs you more every month and you will still be paid out according to the assessor’s valuation.

The claim crunch

As with every type of insurance, the crunch comes, of course, when you have to make a claim. Ombudsman Martin points out that consumers are victims both of the “unacceptably high crime rate” and of “the efforts on the part of the industry to curtail payments of claims resulting from burglaries”.

One major reason for the refusal of claims is the Alarm Warranty. This warranty states that an alarm system has to be present, has to be maintained, set and operational whenever the premises are unattended, and that the insurance company has to be notified it there is any change in the alarm system.

In one instance the insurer (not named) refused a claim on the grounds that the insured did not activate an alarm, despite the fact that the policy conditions made no mention of this requirement.

In another incident reflecting the insurer’s take on the insured’s responsibility for securing the property, a claim was turned down because the fan-light windows in the burgled house were not burglar-barred, regardless of the fact that the fanlight windows were welded closed and the burglars had entered through a window which was burglar-barred! In both these cases, thanks to the ombudsman’s intervention, the claim was paid in full.

Martin also expresses his regret at the fact that a number of insurers insist on what he calls a ‘strict legal-technical’ approach to policy terms and conditions, rather than being guided by the principles of fairness and equity.

For example, while insurance policies do require the insured to supply documentary proof of the value of stolen or lost goods, typically in the case of expensive jewellery, some assessors expect invoices, receipts and other evidence of the exact place and time of purchase for every item purchased.

This is obviously unreasonable. As was the case where an insurance company, again unnamed, refused to pay out on property stolen from the insured’s partner, despite the fact that the policy included ‘members of his family normally residing with him”, that they had been living together as husband and wife for five years and that they owned the house jointly.

Conclusion

Unfortunately this falls less into the category of Aesop’s fables as into the realm of Catch 22. In the South African insurance industry it seems, ‘you pay your money and you take your chance’.