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What is under insurance?

When you purchase a comprehensive homeowner’s insurance policy; you are required to provide the replacement value of the property and contents that you want to insure.

This value or amount is known as “the sum insured” and is used to price the policy. This amount should be the current cost at today’s prices to replace your property should it be lost or damaged by peril.

At times, there may be a discrepancy between the replacement cost of the property and the amount of the sum insured. If the replacement cost of the property is higher than the sum insured amount you provided; this difference is the amount by which your property will be underinsured and consequently, in the event of a partial loss, the amount received from us, will not be enough to pay for the full value of the loss.


What happens if I have a claim?

Premiums are based on the sum insured and, in the event of a total loss, the policy will pay the full sum insured but this may not be enough to replace the property at today’s prices.

When there is a partial loss, claims payments made are based on the sum insured amount of the property as a percentage of the full replacement cost of the property. While it is possible for the Insured to pay a reduced premium by providing a sum insured amount which is below the replacement value, this, however, will result in a reduced or pro- rated payment in the event of a partial loss. In this circumstance, the policy holder is responsible for the shortfall in the sum insured.


How does this work?

In the event of a partial loss, your payment will be calculated based on the replacement cost versus the sum insured of your property. The policy holder will be responsible for covering the shortfall in sum insured and your claim payment will be a proportionate amount by which the sum insured you provided is a percentage to the overall replacement value of the property.


For example:

Your Property (Replacement) Value $150,000

Sum Insured; $120,000

Your Loss (claim): $50,000

Your policy will pay: $40,000

You will be responsible for the other $10,000

$120,000 x $50,000    = $40,000
        $150,000


How do I prevent this from happening?

As your insurance provider from time to time we will remind and encourage you to obtain a property valuation for insurance purposes conducted at least every 3 years to ensure you have adequate cover. We also encourage you to include your contents in the insurance valuation exercise.

To assist you, we can provide references for qualified, independent valuers who offer preferential rates to our clients.

At the time of renewal or arranging a new policy, we will ask you, the Insured, what is the total replacement value of the property and all its contents. This should be the amount it will cost you to replace these items TODAY!
We will also ask about any upgrades or extensions made to your property. This will assist in determining that value.

Would you like to discuss your policy and how to avoid underinsurance or average? Please give us a call at 227-2835 or 227-2872, we would be happy to hear from you.
How does Under Insurance Occur?

When you insure your business, you are required to provide the replacement value of the property and contents that you want to insure.

This value or amount is known as “the sum insured” and is used to price the policy. This amount should be the current cost at today’s prices to replace your property and contents should they be lost or damaged by peril.

At times, there may be a discrepancy between the replacement cost of the property, its contents and the amount of the sum insured. If the replacement cost of the property is higher than the sum insured amount you provided; this difference is the amount by which your property will be underinsured and consequently, in the event of a partial loss, the amount received from your insurer, will not be enough to pay for the full value of the loss.


What happens if I have a claim?

Premiums are based on the sum insured and, in the event of a total loss, the policy will pay the full sum insured but this may not be enough to replace the property at today’s prices.

When there is a partial loss, claims payments are made based on the sum insured amount of the property as a percentage of the full replacement cost of the property. While it is possible for the Insured to pay a reduced premium by providing a sum insured amount which is below the replacement value, this, however, will result in a reduced or pro- rated payment in the event of a partial loss. This pro- rated payment is also referred to in the insurance industry as “Average”. In this circumstance, the policy holder is responsible for the shortfall in the sum insured.


How does this work?

In the event of a partial loss, your payment will be calculated based on the replacement cost versus the sum insured of your property. The policy holder will be responsible for covering the shortfall in sum insured and your claim payment will be a proportionate amount by which the sum insured you provided is a percentage to the overall replacement value of the property.


For example:

Your Property (Replacement) Value $1,500,000

Sum Insured: $1,200,000

Your Loss (claim): $500,000

Your policy will pay: $400,000

You will be responsible for the other $100,000

$1,200,000 x $500,000    = $400,000
        $1,500,000


How do I prevent this from happening?

As your insurance provider from time to time we will encourage you to obtain a property valuation for insurance purposes at least every 3 years to ensure you have adequate cover. We also encourage you to include your contents in the insurance valuation exercise.

To assist you, we can provide references for qualified, independent valuers who offer preferential rates to our clients.

At the time of renewal or arranging a new policy, we will ask you, the Insured, what is the total replacement value of the property and all its contents. This should be the amount it will cost you to replace these items TODAY! We will also ask about any upgrades or extensions made to your property. This will assist in determining that value.

Would you like to discuss your policy and how to avoid underinsurance or average? Please give Trident Insurance a call at 227-2834 / 227-2803 / 227-2812 or 227-2804, we would be happy to hear from you.