Your insurance: Are all bases covered?
We don’t need the newspaper headlines – though there are many – to remind us that times are tough. Inflation is on the rise, sitting stubbornly above the Reserve Bank’s upper 6% target; interest rates are following suit (with three hikes announced since November 2015) and the rand weakened significantly over the past year.
In times like these it is especially important that your insurance policies are up to date and take all risks – including those posed by changing economic conditions – into account.
Underinsurance: Too little, too late
You may think that simply having insurance offers you enough protection. The reality is that your level of cover might be insufficient – and when misfortune strikes, there is little worse than submitting a claim only to find that you aren’t fully covered. Be sure to consider all relevant risks, and to allocate the necessary budget to adequately cover these.
You know your business best
As a business owner, you know the ins and outs of your operations best. But you need to consider more than the overall replacement value of your property, buildings, equipment and average level of stock. Also think of factors that may not necessarily be top of mind: escalating building costs (on average higher than standard inflation), rising replacement costs of imported stock, peak period stock levels (when you might need to adjust your cover) and the costs of rubble removal if your premises are damaged by fire or floods.
Keep your personal cover current
Starting up your own business? Recently got engaged? While your insurance cover is unlikely to be the first thing you think of, it’s critical that you inform your adviser of any significant changes in your circumstances.
For example, you may now be using a personal vehicle for business purposes, which requires a policy update. Or it might be necessary to specify a new, high-value item that you recently received.
Inflation: Claims cost more than you think
The inflation rate, as measured by the Consumer Price Index, is currently 6.2%, well up from 4.5% a year ago.
While consumers are feeling the immediate strain – with food inflation hitting particularly hard – the implications for your insurance cover are equally important.
All else being equal, any item you bought this time last year – be it a new household appliance or professional equipment – costs more today. So, having insured it at last year’s purchase price, you won’t be able to replace it at today’s cost if it is damaged or stolen and you are solely reliant on your insurance claim. This makes regular, thorough policy updates critical.
The rand: Making imports more expensive
This time last year, the rand was trading at just over R12 to the US dollar. Currently, following sustained volatility and Britain’s exit from the European Union, it is valued at over R15, indicating a decrease of about 25%.
Take a look around your house, or your business. How many items are imported? At home it might be your flat screen TV, laptop or expensive fittings. At your business it might be trading stock, specialised machinery or even cleaning equipment. Consider all items that will cost more to replace if they have to be rebought using a weaker rand, and account for the differences in their insured values and realistic replacement costs.
Your responsibilities as an insured client
Your adviser is there to advise you on the most suitable cover to meet your needs. To enable them to partner with you successfully, they are dependent on you to:
- Disclose all relevant details. Inform your adviser of all factors that could impact your level of risk, and the cover you require.
- Provide accurate estimations of value. If you are not confident to verify this information, many insurers can assist by sending appraisers to value your insurable property or goods.
- Keep your policy up-to-date. Your adviser will review your policy annually to make sure it is still accurate and complete. However, if your circumstances change between reviews please let your adviser know as soon as possible. Accounting for the impact of inflation and exchange rate movements is also key.
By working with your adviser you can rest assured that your personal and business interests are well protected.