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Know Your Policy – Part 2; All Risks Cover

By Kayser Baird | Durban | August 21, 2014

Insurance at uncompromising standards of service

~Kayser Baird Insurance

Most people understand that House Contents insurance covers you for fire, storm and theft of your belongings whilst inside your residential property.

When people leave their houses and take belongings with them however, things become a bit vague. This post is to tell you more about how to correctly insure your belongings when you are away from your home.

Your personal insurance policy has a section called “All Risks”, “Out and About” or a variety of other names. This section enables you to individually specify items such as camera’s, laptops, jewellery, sporting equipment etc and also to take blanket cover for clothing and personal effects when you are away from your house. The cover is generally referred to as “All Risks” because it covers you for any type of loss, including water damage, accidental damage or simply leaving an item on a restaurant table or on the roof of your car. The term “All Risks” essentially means that you are covered for any loss, except for what is excluded on your policy, whereas most other insurance classes are “Perils Based” which means that your policy outlines what you are covered for.

All Risks cover can be more expensive than other types of cover, because the cover is so broad and you will claim more frequently under this section than under other sections of your policy.

Generally speaking, we would recommend taking a minimum of R5000 to R10,000 “Clothing and Personal Effects” cover under All Risks, and then also specifying individual items that you would want to claim for if they were lost, stolen or damaged. Clothing and Personal Effects is blanket cover, that will allow you to claim up to a certain value per item, for things like clothing, sunglasses, shoes, bags etc. You cannot claim for laptops, cell phones or tablets under Clothing and Personal Effects, but you can claim for watches, Garmin GPS’s that are worn on the wrist and certain sporting equipment.

What cover do I get from my House Contents insurance when away from home?

Your House Contents cover does actually provide you with some cover for your belongings while you are away from home. For example, Kayser Baird’s Santam and Hollard personal policy’s will cover you for theft of belongings out of your vehicle, if the items could not be insured under All Risks / Clothing and Personal Effects. In other words, you cannot insure a laptop under clothing and personal effects, so if your car was broken into and your laptop was stolen from a locked boot or compartment – you would be entitled to claim under House Contents for your loss. Remember that the same rules that apply to House Contents would apply to this claim, so your car would have to have been broken into or force would have to have been used to take your laptop off your person.

The difference with All Risks cover and House Contents cover when it comes to a laptop claim, is that All Risks would cover you if your laptop was stolen from a coffee shop or if you spilled water on it, where House Contents insurance may not.

Why do insurance companies sometime pay out less than the insured value for All Risks claims?

Your contract with your insurance company is that you have to pay them a premium, and they have to put you back in the same position if you suffer a loss. You need to insure your belongings at the value that it would cost you to replace them, but the insurance company is entitled to either replace your item or to pay you out in cash. If you request a cash payment, the insurance company will pay you what it would have cost them to replace the item, which can sometimes be a lot less than you because they have economies of scale and can buy certain items cheaper than you can. This is an important efficiency in the insurance industry and if the insurance companies did not leverage their scale to buy things for cheaper, we would all pay more for our insurance.

You have to insure the item at the full replacement value, because it may cost this full value to replace the item in the event of a loss.

If you under-insure your All Risks items, the insurance company will only pay out up the amount insured and if there is a shortfall this will be for your account.

What should I insure under All Risks?

There is no rule of thumb here because it is really down to personal preference and your appetite for risk, but you should certainly consider insuring items that you could not afford to replace if they were lost or damaged. It is especially important to insure items that you cannot do without, for example cell phones or expensive sporting equipment for enthusiasts (such as golf clubs or Garmin GPS’s).

You can also insure sporting goods such as surfboard, bicycles and board-sport items – but some of the insurers will not cover these items whilst in use so be sure to chat your broker about your specific policy when adding these items.

Jewellery is also commonly insured under All Risks, particularly items that are worn regularly.

What are my responsibilities if I need to claim?

If you claim for jewellery under the All Risks section of your policy – you will usually be required to present a valuation certificate before the claim will be processed. Some insurers will require this before they even add the jewellery onto the policy. If you claim for a pair of shoes or sunglasses – the insurance company reserves the right to ask for proof of ownership, which can be a receipt or a photograph of your wearing the item. If you cannot produce this proof of ownership – it is at the insurance companies discretion whether or not to pay the claim.

The treatment of pairs is often a subject of debate – if you insure a pair of earrings on your policy and lose one of them, the insurance company will only pay you out for the missing item and not for the set. This is because your contract with the insurance company is to be put back in the same position as you were and not to put you in a better position.

If you would like to find out more about the Personal Insurance products that we offer, please contact us.

 

Next week in “Know Your Policy” we look at insurance for your house and other fixed structures in  Part 3 – Buildings Insurance.

Read previous posts in the “Know Your Policy” series;

Part 1 – The Average Clause

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