Replacement Cost Valuations and Replacing Assets
It is important to note that insurance valuations or replacement cost valuations is not always a straight-forward process, often you might be over- or under-insured. Ideally you would want to work on the principle of like-for-like and aim to replace your asset to the same value as directly before the occurrence of the loss incident.
For example, you do not want your gas stove to be replaced by it being only delivered to your doorstep, you want to have the current gas stove removed and the new one installed. Professional fees and labour are just one example of the additional elements to determining insurance value than just the value of the asset or building.
Why consider Risk surveying?
If you are going to have the replacement cost valued correctly, you might as well also ensure that you are covered for the correct risks.
Often, if you read your insurance policy, you might not be adequately insured for the types of risks specific to your property (location, use) and assets. Although we know that one needs cover for fire, theft etc. it is very important how theft is specified in your policy which will determine if the insurer pays your claim.
For example, if you had an outbuilding insured but you did not specify the copper cables attached and running to the building, you might not be adequately covered for theft. Conducting a physical on-site risk survey is important in determining how to structure your policy and for what risks you need to be specifically insured.
Why is an accurate policy structure important?
The two preceding points becomes irrelevant or redundant if you do not also ensure that the structure of your policy is correct. For example, if you have your household contents insured at a group value of R 300 000, that does not mean you are covered for theft when there are broken into your house and the laptop is stolen. You need to specify the assets you want to have insured on your policy, but more than that you also need to specify for the type of cover you would like.
For example, if you try to take out insurance cover for your mountain bike, you will probably be levied with quite a steep monthly premium as the insurer sees the risk of it being stolen as relatively high. However, if you are careful to be on or near your bike when cycling or resting, then you can take out cover only for if it is stolen from your home. It is not necessary to obtain “all-risk” cover as you are with your bike most of the time. If you go on holiday, just ensure that the address where you are staying is included in your policy for that time.