Durban - It often takes a tragedy or significant event to make you take action to protect yourself in case of similar future occurrences – action that you know you should have taken long before.

And with the current flooding in parts of KwaZulu-Natal, many homeowners and tenants are wondering what they are really insured against. Or regretting not being insured at all.

Weather events have “significant implications” for how people approach their insurance planning in the face of a worst-case scenario, says Mandy Barrett of risk consultants and insurance brokerage, Aon South Africa.

“In the event of a severe weather event such as a flood, fire, or tornado, you are likely to experience a severe loss scenario, potentially having to replace all your household contents and in a worst-case scenario, possibly the entire structure of your home or even your motor vehicle.

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“In a severe or total loss scenario, finding yourself under-insured can prove to be financially devastating, so extra attention needs to be paid as to how robust your insurance planning and coverage is to cater for such an event.”

The current floods come at a time when many South Africans are still reeling from the financial implications of the Covid-19 pandemic, and many households have had to cut costs to keep their heads above water. For some of them, it may have been their insurance premiums.

“While there is always the temptation to cut insurance costs in a bid to save money, the better approach would be to review covers with your broker and right-size them to achieve better rates and cover,” she says.

“Major assets such as cars and homes are often not correctly insured which is a real concern. If this is the case, you may discover that you are only partially covered because of what insurers call the application of the ‘average formula’ at claims stage.”

Echoing this, Chris Cilliers, chief executive and co-principal of Lew Geffen Sotheby’s International Realty in the Winelands says home owners grudgingly fork out for insurance every month consoling themselves that at least if something does happen, they are covered, but many don’t realise that they are, in fact, under-insured, and unfortunately most will only find out once it's too late.

“This is especially common among older home owners who have often not updated their insurance policies in many years and, as they are often on a fixed income from pension by then, it can be financially crippling if not devastating when the pay-out falls far short of the replacement value.

“The elderly often have no idea how much their homes are worth as they probably paid about R50 000 for it 40 years ago...”

She adds that whilst there is a mortgage, banks ensure that there is insurance in place for at least the amount of the bond, but once the bond has been repaid, many home owners forget to keep their eye on the ball in this aspect.

“It is important that owners understand that they need to adequately insure for the replacement value of the building, not just the market value, plus all the contents and they must specify items that are valuable.”

Frans Labuschagne, Director of Cape Town-based insurance brokerage, FJL Consultants, agrees and cautions that home owners should also take the time to do their homework and ensure they have a policy that best suits their needs and situation.

“Although the standard cover for all insurance is basically the same, each and every insurer and underwriter differs to a degree, with different bells and whistles on offer and certain policies may therefore suit your unique needs better than others.

“The way claims are settled also differs from company to company as some adhere strictly to their underwriting, whereas others are more flexible and open to negotiation where possible.”

Many people, he says, also do not realise that to be adequately insured the following elements must be adequately valued:

• fixtures and fittings

• fixed recreational and ornamental structures

• paved and surfaced areas of brick

• concrete

• asphalt

• synthetic grass or stone (not gravel)

• boundary and other walls

• gate posts and gates, including all their mechanisms and fences.

Cilliers says underinsurance also often occurs because people mistakenly think that a home should be insured for its market or sale value, but in order to cover all eventualities it should actually be insured for its replacement value; that is, the cost of rebuilding the property to its original condition.

“The same applies to household contents insurance. Household items and valuables must be insured for their replacement value - not what you originally paid for them. For this reason, it’s important to update your policy at least once a year, and ensure everything is covered.”

Tenants also need to ensure their household contents are insured and that is not the responsibility of their landlords, explains Belinda Hickson, principal of Jawitz Properties Midrand.

“Unfortunately there are tenants and landlords who neglect their responsibilities when it comes to maintaining and keeping the property in a good state. Both parties have responsibilities and it’s crucial that they both know where they stand.”

Landlords are responsible for having the house insured against fire, flood, and other structural damages. Tenants on the other hand, should ensure they take out household contents insurance.

“If there is a burst geyser, for example, and water damage destroys your television, you cannot expect your landlord to pay for a new television. Tenants are responsible for covering their own contents.”

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