Vehicle
Under insurance (or Average) is sadly often misunderstood, not understood at all or simply overlooked because of budget restraints. Inflation has now become a real contributing factor as well. People take out insurance cover and go to bed at night comfortable in the knowledge that in the event of loss (theft, fire etc) they will be fully covered.
This article is directed at the “man in the street” who has taken out an insurance policy to cover their personal possessions and more specifically their house and/or the contents of their house through a broker/agent or direct through Botswana Insurance Company.
The article is intended to give a broad idea of how to avoid under insurance and the financial implications that follow under insurance. It is totally unrelated to claims where there is no cover.
The net result is that where a claim is settled and under insurance has applied the claimant often feels cheated, for various reasons such as “nobody explained that to me” and unnecessary perceptions are created against the broker/agent and Botswana Insurance Company. We would obviously like to pay the full claim but in order to do so we are also entitled to the full premium.
Detailed below are a few points, which we believe, will greatly assist you in being adequately insured.
Contents cover (Householders policy)
- The sum insured must be realistic of the replacement cost today. Notwithstanding that you bought a lounge suite, 3 years ago, for say P 3000 the current price for a similar suite could be as much as say P 5 000 today. This will apply to all items of furniture in the house.
- An exercise which we encourage is to do an inventory of the contents listing the estimated replacement costs of all major/expensive items. To assist an inventory is enclosed.
Building cover (Houseowners policy)
- What people fail to realize is the cost of building today. You are not going to build a house for less than P 2 000 per sq.m. Luxury houses in Phakalane and other areas of Gaborone are costing in excess of P 5000 per sq.m. Do NOT insure your house based on the valuation given by the Councils for the purposes of calculating the annual rates etc. This is far to low.
- We recommend that you measure the square metre (sq.m.) of the house and out buildings and apply a rate, which you consider to be realistic depending on the quality, finishes etc. Naturally the rate on the house will be higher than the outbuildings because of the finishes.
- What is also generally not known is that the policy covers the cost of engineers, architects, project managers etc as well as demolition and debris removal. Therefore these costs must also be included in the valuation.
- The boundary walls, electric gates, motors and swimming pools must also be included.
- We detail a typical valuation calculation;
| Main dwelling 220 sq.m. @ P 3 500 | P 770 000.00 |
| Out building 60 sq.m. @ P 1 800 | P 108,000.00 |
| Debris removal @ 8% | P 70,240.00 |
| Professional fees @ 10% | P 90,824.00 |
| P 1,043,306.00 | |
| Wall, gates etc | P 50,000.00 |
| Pool | P 50,000.00 |
| P 1 143 064.00 |
Under insurance
This example will apply to both of the above policies
Sum insured P 300 000.00
Replacement cost P 600 000.00
Claim (as agreed) P 50 000.00
By applying under insurance (average) the claim will be adjusted as follows;
Sum insured P 300 000 x P 50 000 = P 25 000 (adjusted claim 50%)
Replacement cost P 600 000
Under insurance (average) is a standard condition applied by every insurance company to almost every policy.
We trust that the above will be of assistance, but please feel free to contact BIC should you have any queries regarding the above.
Disclaimer
The above is a guideline only. BIC will not be held liable for any decisions reached using the above and nor does it preclude your insurer from applying average to any claim.
