When considering or purchasing Asset insurance, the most important decision you will make, is setting your sums insured (values). Over-insurance is simply a waste of your premiums, but underinsurance can have a devastating affect on your final settlement. As a simple example, you have a flood at your premises and there are repairs and replacement items totaling $25,000. If you have insured your asset for, say $100,000 and it should have been insured for $200,000, you are 50% underinsured and your claim will be reduced by that amount. In effect, you will receive only $12,500 and the balance you will need to find yourself. This is called the condition of ‘Average’ and is found in every asset policy in Kenya.
Unfortunately, underinsurance only usually comes to light when a policyholder has a claim, discovering to their detriment, the effect this has on their settlement. We often find instances where a policyholder will suffer after a loss due to their sums insured being inadequate.
Examples of this are:
- Where a specified item has not been valued for a while and remains on the schedule this may not have kept up with market values. The maximum payable is the sum insured.
- Where a policyholder has undertaken a lot of home improvement work without giving consideration to their Buildings sum insured.
Reinstatement following a loss could therefore find a policyholder having to dig deep into their pocket on discovering that the sum insured was inadequate. Always ensure that sums insured are calculated on the correct basis:
- Contents – this should represent the full replacement value of the entire contents of the home, not forgetting those in outbuildings, gardens or the loft.
- Fine Art & Antiques – this should represent the full market value, so you will need to be aware of market trends.
- Jewellery – As most jewellery items will be unique in their origin, this should represent the current market value.
- Buildings – this should represent the full cost of rebuilding the home to its existing specification, not forgetting to include an element for architects’, surveyors’ and legal fees, plus the cost of debris removal.
To discuss any insurance matter further or to request a home insurance quotation, please call JW Seagon on:
+254 709 455 032
or complete the following form.
Calculating the correct sums
Arriving at the correct sums insured is not always easy without some assistance and we can provide this in a number of ways:
- Buildings – Must be insured on the cost to rebuild as new, NOT on market value which will always include the land and location. To be certain, a professional valuation is the desired route, but most people know a friendly builder who can give you a pretty good estimate for you.
- Contents – A room by room guide is available to undertake an exercise in helping to ensure that everything is included. Please use our user friendly calculator on the following pages.
- Valuations from the experts are always very useful – and often essential for high value items.
- Jewelers are usually able to provide valuations on jewelry and watches, but do ensure they are a reputable firm to ensure accuracy.
- Having established correct sums insured, these should always be checked on a regular basis to ensure that they are in keeping with any market trends.