The Rand’s staggering fall against the US Dollar has serious implications for consumers when it comes to the sums insured on their motor and household insurance policies.  In one year alone the Rand has devalued by 41% against the US Dollar from trading at R11.43 in January 2015 to R16.17 on Wednesday, 3 February 2016.

According to Mandy Barrett of insurance brokerage and risk advisors, Aon South Africa, the knock-on effect of the Rand’s depreciation on the insurance industry is quite profound.  “The replacement costs on imported car parts and imported goods are skyrocketing.  It’s important for consumers to assess the potential impact that the falling Rand may have on the insured value of their property, and in particular, the cost to replace equipment, parts and items bought overseas.”

“In the current scenario, the actual replacement value of items in your home and repairs on your vehicle could very easily outstrip the values that you are insured for,” warns Mandy.  “Consult with your broker who will perform an insurance needs analysis to establish replacement values at today’s prices, and if necessary, arrange for a professional valuation of your assets to ensure that you are not under-insured.” 

“When one considers that the Rand’s value has declined by more than 40% against the US Dollar, UK Pound and the Euro, you could potentially be left seriously out of pocket in the event of a loss or claim.  Your designer SMEG kitchen, imported audio-visual equipment, designer furniture, smart devices, apparel and clothing all come with much heftier price tags today than they did a year ago,” says Mandy. 

“If you are under-insured in the event of a serious loss, you may however find yourself in a situation where you are paid partially for a loss at claims stage.  Insurers call it the ‘average formula’ which means that if your property is under-insured by 40%, for example, then you may only be paid 60% of your claim, regardless of whether it is a partial or total loss,” explains Mandy. 

“Many people also insure their home for the value that they purchased the property for years ago, or at the current market value, rather than the actual replacement cost.  The cost to replace your home, at today’s building prices, could have appreciated well beyond your insurance cover,” Mandy adds.

“A professional broker will confirm exactly what you are covered for and whether any exclusions or special conditions exist on your policy - an area that most people are unaware of.  A broker can ensure that you are in good hands in the event of a catastrophe and ensure that you are not financially compromised come claims time.  Most importantly, they’re there to protect your interests come claims time and to ensure that you get a fair and speedy settlement of your claim,” concludes Mandy.