Still insured for the home you had two years ago?

Load-shedding schedules pinned to the fridge. A new washing machine bought on a Black Friday deal. A garage converted into a home office somewhere between one lockdown and the next. None of it feels like the kind of thing you’d think to phone your insurer about.

Yet across South Africa, this is exactly where underinsurance quietly takes root not in one dramatic oversight, but in the small, ordinary changes to a home and its contents that never quite make it onto a policy schedule.

Most homeowners only discover the gap at the worst possible moment: while a claim is being assessed.

A payout that doesn’t match the damage

So what does underinsured mean in insurance terms? Simply put, being underinsured means the sum insured on your policy is lower than the true cost of rebuilding your home or replacing its contents today. 

Submit a claim while that gap exists, and the payout is typically reduced proportionally, in line with the shortfall.

In practice, that means being covered for only a percentage of every loss, on every claim, for as long as the values stay out of date.

Where the gap comes from

Underinsurance rarely happens on purpose. A few habits tend to be behind it:

• Old values linger. Contents get valued at what was originally paid, or at depreciated worth, instead of today’s replacement cost.
• Market value gets mistaken for rebuild cost. What a home would sell for and what it would cost to physically rebuild it labour, materials, professional fees and VAT included are different figures entirely, and basing buildings cover on the wrong one is a common misstep.
• Costs climb faster than reviews happen. Materials, labour and imports all get more expensive over time, regardless of when your renewal date falls.
• New purchases go unrecorded. Appliances, electronics, furniture and jewellery accumulate steadily, while the contents policy often stays where it was.

Two types of cover, two different jobs

Buildings cover is there to rebuild the physical structure and fixtures walls, roof, built-in cupboards, plus the professional and VAT costs construction work brings. Contents cover is separate, replacing everything inside those walls: appliances, furniture, clothing and linen.

Research from the South African Insurance Association (SAIA) shows many people underestimate the true cost of replacing everything in their home at current prices, and only find out once they’re facing a claims assessor.

Businesses carry the same risk, often at higher stakes

A fire, flood or break-in can expose gaps businesses didn’t know they had: asset registers that haven’t been updated in years, machinery valued at purchase price rather than replacement cost, and business interruption cover based on outdated turnover figures that leaves a business short just when it needs support most.

Why this needs regular attention in South Africa

This isn’t a once-off fix. Data from Statistics South Africa and commentary from the South African Reserve Bank both point to construction and repair costs that climb steadily, meaning an accurate policy from two years ago may already be behind today’s real rebuilding costs. The FSCA has also stressed that fair outcomes on short-term insurance depend on policyholders keeping their information current.

A quick self-check

• When did you last update your buildings and contents values?
• Are those values based on today’s replacement cost, or an older figure?
• Have you renovated, expanded, or made any big purchases since your last review?

If any answer gives you pause, it’s worth revisiting your sum insured now, rather than at claim time.

OUTsurance believes that conversation is best had before something goes wrong, not after. Getting your values right from the outset means that when you need to claim, you can do so with confidence. 

OUTsurance is a licensed insurer and FSP. Ts & Cs online.

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