World Cup winners check their insurance

World Cup fever is at its peak and some sports enthusiasts go all out to capture the big game action by upgrading television systems.

However, they fail to amend their personal insurance cover to include these new purchases;   putting themselves at risk of suffering loss.            

Failure to reflect major new purchases in the estimate of replacement values for household contents may lead to under-insurance. Policyholders can then lose out in the event of a claim as an insurer is only obliged to make restitution in line with the level of cover provided by the premium structure.

If R100 000 in cover is provided, but the true replacement value is twice that at R200 000, then an insurer is entitled to meet only half the claim.
 
Merrick Oeschger, Executive General Manager, Personal Business, at Mutual & Federal, comments: "Under-insurance occurs all year round, but often comes into focus during the World Cup when sports fans invest in major acquisitions for the TV room.

"Years ago, it was wide-screen colour sets. Then came flat-screen TVs and the first generation of outsized plasma screens. Now the new wave of hi-definition screens is available. Prices can easily top R25 000.

"It's a great way to watch the World Cup, but some unlucky buyers will suffer loss at some stage. If theyve neglected their insurance, they could lose out. If you want to be a World Cup winner, its prudent to check your insurance after buying a big-ticket item."

The special-event purchase tends to be made by better-off families that are deriving benefit from the wealth effect created by sustained economic growth. Typically, it will be the latest in a series of lifestyle upgrades.

Regrettably, says Mutual & Federal, upwardly mobile families often fail to undertake a review of household contents and replacement values, creating a mismatch between cover and the cost of full restitution.

The mismatch is compounded if the family has simultaneously made significant home improvements.

Says Merrick Oeschger: "Economic growth is obviously positive for the country and those families that improve their standard of living. However, it is a source of concern for an insurer when credit extension figures and other indicators suggest an uptick that is not reflected in revised values on our personal insurance book.

"Disparities between values listed in the policy and replacement values can be significant. A R500 000 mismatch is no longer unusual. A proportionate settlement can then lead to a significant net loss for a consumer who, in effect, has assumed this portion of the risk in his personal capacity.

"The message is simple. Whether youre a sports fan or not - play safe with your household contents insurance and undertake a thorough review.

* Consumers requiring assistance with a household contents inventory and an accurate assessment of replacement values should consult their insurance intermediaries.