How the depreciating rand will affect your sum insured
As the volatile rand continues to decline against the US Dollar, South Africans need to ready themselves for the impact on the insured value of their belongings. The depreciating rand will affect the sum insured especially for imported items.
Replacement values must be updated
Comprehensive and effective insurance requires that the replacement value of all insured items to reflect their most recent values in the policy documents. If these values are not regularly updated, owners may find themselves in a situation where the full replacement value will not be paid by the insurer in the unfortunate case of loss or damage.
Therefore, consumers need to periodically update the value of their possessions during a time of currency fluctuations such as the weakening of the rand of late, especially imported and high ticket items. Items bought overseas will require clients to be in possession of proof of payment slips to assist in the settlement of claims.
High ticket items are more vulnerable
The rand has been trading at its lowest level against the US dollar since December 2001 which means that all items bought since then will cost more to replace today. The influence of the weakened rand on insurance replacement value is now material to items such as clothing, sporting equipment, electronic equipment and the like.
Personal and business vehicles
Another category that will be adversely affected by the depreciating rand is the cost of imported car parts. The cost of repairing your personal or business vehicle after an accident today will inevitably be higher than a year ago; this is due to the exchange rate and overall rising cost of spare parts. For the same reasons, we will most probably need to face increased car premiums before the end of this year.
Business owners – be aware
Business owners are equally vulnerable in such fluctuation economic times. As with personal possessions, business owners must see to it that replacement values on their commercial insurance policies are kept up to date. The cost of imported plant, equipment and machinery would have increased recently therefore, it is advisable that clients contact their local broker to update replacement values.
For businesses that need to keep large amounts of stock on hand, it is imperative that replacement costs are updated on a regular basis to protect business assets and reduce risk exposure.