Under-insurance is a big mistake and represents a danger to your financial health. Why?
Because, for example, if you are 50% underinsured and half your goods are stolen, you will only be paid out 50% of the replacement value of the goods that were stolen.
We asked an insurance broker about over insurance. "Would it be better for a person to over insure, just to make sure that she was not underinsured?"
"Not really", was the answer. "There is no way you can benefit from over-insuring, just aim to get your valuation right", she said.
Of course the issue of under-insurance is affected by the assets you are insuring. Please take the following into account:
Under-insurance and your homeMunicipal valuation is irrelevant: it could be far too high or far too low, depending upon the economic and valuation cycle.
To avoid under-insurance (or over insurance) have your house valued from time to time and then watch the housing market and make adjustments annually.
Your home insurance relates to replacement value - the cost of replacing the dwelling you had. You will not get more if you over-insure, but you will get less if you under-insure!
Household contents and underinsuranceIn the case of household contents, you will also (as in the case of home insurance) be paid out for the full replacement value, provided you are not under-insured.
Car insurance - the risk is overinsurance!In the case of car insurance your risk is over- rather than under-insurance. As cars age, and clock up kilometres, their values fall.
Your insurance company will pay you out for the current value of your car. So make sure you reduce the insured value of your car each year. Insurance companies should do this for you. Make
sure they do! If you have a broker, write to her telling her to do so on your behalf. |
