“Trying to navigate the terms and conditions of your insurance cover can be challenging, especially if you’re trying to compare insurance quotes and conditions of cover as these can vary markedly from one policy and insurer to another. One of the best investments you can make in safeguarding your hard-earned assets is to get the advice and guidance of a professional insurance broker who will be able to compare product benefits, technical specifications, terms of cover and pricing to find an insurance solution that is best suited to your needs and circumstances,” explains Mandy Barrett of Aon South Africa, a leading global professional services firm and insurance broker.

Aon lists a few common insurance terms and conditions to help you understand your cover better, and thus make better decisions about your risk planning:

• Insure for the retail value of the vehicle - Ideally, you want to be in a situation where your insurance can replace ‘like for like’ and avoid being paid out less than the value of your vehicle. Essentially, retail value is the price at which a vehicle dealer will sell a vehicle to you. Market value is the average of the difference in price between retail value and its trade-in value, in other words what you could expect to receive from a dealer if you were to trade the vehicle in.  Always insure your vehicle at retail value.
• New replacement value - If you buy a brand, new vehicle and it is written off within the first year, the vehicle would normally be covered for the replacement value of a new vehicle.
• Credit Shortfall Insurance – A risk that is often overlooked is that of a credit shortfall on a financed vehicle.  This typically arises when a vehicle is written off in the first two years of signing a finance agreement to purchase the vehicle.  Accrued interest on the loan within the first few years may very well mean that your insured value of your vehicle could actually be less than your outstanding debt to the bank.  If you don’t have credit shortfall cover to settle this amount, you will be liable for the shortfall between what’s owed to the bank, and your insurance settlement which does not cover you for the interest.  
• Replacement Cost – refers to the amount it would cost to replace or rebuild an item of similar quality using materials and goods that are currently available. Many make the mistake of insuring their home or valuable items for the value that it was bought for, while the cost of replacing the entire structure of your home for example could be far more than what you paid for the property ten years ago, leaving you financially compromised in a worst-case scenario. 
• The Average Formula - If you are under-insured in the event of a loss, the insurer will assume that you have elected to carry a portion of the risk yourself. As a result, you may find yourself in a situation where you are paid partially for a loss at claims stage due to the average formula being applied. It 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.
• Valuation – Refers to a financial assessment of the worth of an item, or the monetary value associated with an asset to insure it for. A good place to start is making a comprehensive inventory list of all the items in your home to gain a better understanding of the structure’s worth, as well as all the contents and fixtures in it. In the case of appreciating assets such as jewellery and artwork, it is highly recommended to update your valuation certificates every year and to insure it for its current replacement value. 
• All Risks Cover – Household contents cover is usually applicable to items that stay within your home. As soon as an item is taken outside of your home such as jewellery, smartphones, laptops, sports equipment, designer sunglasses or luggage, these items are no longer covered. It’s one of the reasons why it is important to specify the items that may ‘travel’ with you under the ‘All Risks’ section of your household contents policy.
• Excess – In most insurance policies a claim is subject to the payment of an ‘excess’ (sometimes also called a ‘deductible’), which refers to the first portion of the claim that you are responsible for. In the insurance world, it translates into you taking on a portion of the financial risk that affects your insurance premium whether it is a fixed amount or a percentage of the claim. Be very wary of taking the lowest premium as the bite is often in the high excess structure – in some instances this can be as much as 25% of the insured value or a fixed fee - whichever is the greater. If you consider a claim value of R100 000, the excess at 25% would be R25 000 – very few people have that kind of spare cash around to cover their excess payment. Make sure to discuss your excess options with your broker. 
• Escalator Clause - An escalator clause is a provision within an insurance policy that allows for an automatic annual increase in the sum insured to cover any unexpected costs arising from future fluctuations, that can either be linked to the Consumer Price Index (CPI) or can be stipulated as a set percentage.
• Wear and tear – maintenance-related losses are one of the key reasons for a claim being rejected or the settlement being less than expected. Remember that insurance is there to cover sudden, unforeseen circumstances which result in loss and/or damage and does not cover damage as a result of negligence or wear and tear. Examples of wear and tear include rising damp around your house, water leaks left unattended that could lead to major structural issues on your home, smooth tyres on your vehicle which could cause an accident or blow out and so on.  
• Safety measures – Your insurance cover may be subject to certain security measures that need to be in place, such as burglar bars on all opening doors and windows, a tracking device on your vehicle or arming your alarm system when not at home.

The guidance of an experienced broker adds tremendous value in guiding you towards a better understanding of the terms and conditions of your cover. Your broker will make sure that you are not compromised or prejudiced by unreasonable or onerous limitations on your cover, and that you are comparing apples with apples when it comes to premiums and excesses - the most important consideration being that if and when you need to claim, that there are no surprises waiting for you that could leave you compromised.

Photos by Pixabay
Article by Insurance Gateway
Written by Mandy Barrett of AON South Africa