The importance of having the correct insured value for your property & household contents

With the recent April / May 2022 storms and the devastation that ensued, we would like to highlight two very pertinent points that need to be considered and reviewed annually to safeguard oneself in the event of a claim.

In these times we can all understand reducing expenses wherever we can, especially on something as intangible as comprehensive insurance cover on our fixed property. It’s a case of “we don’t want to pay for something we don’t perceive as obligatory, until we realize we need it”!

Having said all this, it is vitally important to make sure that your property is properly insured (and be aware that this is the responsibility of the property owner and not the insurer).

Meaning of Underinsurance & New Replacement Value

Underinsurance is when the sum insured of your Building or Household Contents as noted in the policy schedule, is less than its full current replacement value.

The property valuation industry’s definition of Replacement and Insured Value is as follows:
The Insured Value of the property should reflect the Estimated New Replacement Cost of all improvements (as if new and at prices applicable at the valuation date), inclusive of professional fees, construction costs, the escalation of rebuilding costs, demolition costs of remaining partially destroyed property and unusable improvements in the event of partial destruction.

The above same principle will apply to the Household Contents section.

The impact of Underinsurance in the event of a claim & Average

  • In the event of underinsurance at claim stage, the policyholder will be liable for a proportion of the loss regardless of whether there is a total loss or partial damage.

Example: A building is insured for R1 Million. The building is damaged following a storm and the cost to repair this damage is R100 000.

  • An assessor is appointed and they discover that the current replacement value of the building before the storm is actually R2 million and not in actual fact R1 million as per the sum insured. Average is now applied.
  • This means that the policyholder is underinsured by 50%.
  • The insurers then only pay R50 000 (50% of the R100 000), less the excess applicable as stated on the policy schedule.
  • In this instance, the insurers will generally settle the claim in cash and will not repair or replace the insured property. The responsibility is then on the policy holder to attend to repairs or replacement of the item. The policy is amended to note that cover in respect of the damaged property is excluded until such time proof of repairs are received and on file.


Buildings sum insured considerations

  • The sum insured is not the market value of the building and should not include the value of the land.
  • The sum insured must be based on the current replacement value of all the structures, fixtures, fittings and connections, including any professional fees and demolitions costs. Each component of your property (main house, outbuilding, driveway/ paving, boundary walls and swimming pool) has a different replacement cost applicable (dependent on the quality, quantity and finishes of the property). This all contributes towards the total insured value of your property.
  • The sum insured must exclude the value of all items that are not included in the building definition such as water, loss of compacted soil/earth/gravel, inflatable swimming pools, pools above ground level and portable spas.
  • A property valuer can assist by undertaking an inspection of your property wherein measurements are taken on site (and checked against building plans, if available) and a breakdown of components with relevant replacement costs applied in order to calculate the correct insured value for your property. A suitable contact would be Roper & Associates Property Valuers and their details are as follows:
    Tel – (031) 207 8009
    Email – / Website –
  • Important – retaining walls need to be signed off by an engineer and a certificate will be required by the insurers prior to cover being granted.


Household Contents sum insured considerations

  • The sum insured must be based on the current replacement value of all tangible and movable property used or kept within a household, including goods kept in the outbuildings, such as a garage and storeroom.
  • Furthermore, the sum insured must include the value of all the art in the home, unless the policyholder is an art collector and has chosen to self-insure their art.
  • An inventory form is available to assist all policyholders in determining the total adequate value of their contents, please contact our offices should you require same.


In closing, we appreciate your partnership and would like to remind you that we are always a phone call away to assist you.

We wish you a successful, healthy and happy week ahead!