‘A CLEVER person solves a problem, a wise person avoids it…’ says Albert Einstern. One of the key ways and probably the best way to avoid a loss is by buying appropriate insurance.
As we continue to discuss the subject of householders insurance I am reminded of a recent situation where my borehole submersible pump was damaged due to power fluctuations despite having a power surge controller.
It was on a weekend when I had to run around to find a replacement at all costs otherwise we were going to stay in a house without water since we use borehole water.
After rigorous errands to restore supply I managed to buy another pump at least the following day. Thanks to the householders insurance I had in place which covered the loss!
For the first time I was able to claim on my insurance policy by being refunded whatever I spent to replace the damaged pump.
Boreholes and pumps can be covered on both house owners and householders. The distinction is the perils covered as discussed in the previous articles.
House contents are usually covered on replacement value.
If an item is lost or damaged the insurer will buy a new one for an old one which is technically known as reinstatement or ‘new for old’ provided the value does not exceed the sum insured.
Further, where the item is reparable then the insurer will pay for repair costs.
With this enlightenment of what is covered under householders and the basis of settlement (new for old) I now move to look at what is required to buy this insurance and how much it will cost.
For the insurer to give you a quote they need a list of all your contents as discussed last week. These contents can either be on specified or unspecified basis.
The usually accepted of the two is the specified basis where a list of individual items is used.
On the unspecified basis a block amount is declared and will be the sum insured.
However, there is a single limit per article agreed from inception for example K10, 000 per article.
This means that if there is a loss on any item or article the maximum that the insurer will pay will be the single article of K10, 000.
A lot of care needs to be taken when arranging insurer on unspecified basis.
Further given the exposure, the same insurers will normally rate the unspecified basis higher than the specified one.
With the sum insured or limits agreed the insurer will apply a rate per mille or a percentage on the limit declared.
Going by the industry rates in force the minimum rate applicable on a householders policy is about 1.125 per cent.
If the total value of your contents is K200, 000 then the premium payable before VAT will be about K2, 250 only, ceteris paribus.
With this amount you are covered for the entire year and should any named peril cause loss or damage you will be compensated up to the sum insured.
Under householders, contents are covered only when they are at the location declared at inception. It is, therefore, paramount to notify insurers when relocating so that their records are updated.
Normally there will be no additional premium unless there is some draconian change in the risk.
The policy, however, will automatically cover the contents in transit when moving to a new place.
This means that if there is an accident for example along the way which causes loss or damage to the means of conveyance and subsequently to the contents; the latter will be covered under the householder’s policy.
Those items that are frequently carried along from home such as cameras, phones, musical equipment etc. need an insurance called All Risks policy which will be the subject of another day.
Under the householders, insurers will cover jewellery separately which given their nature of being more valuable and more susceptible to theft attract different terms and premium to reflect the degree of risk.
Well, such topics are not exhaustive but I hope from this and last week’s discussion you will be equipped enough to buy insurance for your household contents.
For more information on insurance you may get a copy of my book dubbed “Basics of Insurance, The Zambian Experience” from any Bookworld shop or at Radio Christian Voice, Lusaka or at Insurers Association of Zambia secretariat or simply get in touch on the contact below.
Comments: webster@picz.co.zm or webster_tj@hotmail.com or on face book search for Insurance Talk-Zambia page or call/text 0977 857 055
[The Author is a Chartered Insurer with more than 10 years industry experience]