Insurance estimates are best provided by an insurance broker or an agent. It makes sense to have at least three different commercial insurers assess your business needs and to give you an estimate of the premium for an all-risk insurance package.
Rates are usually calculated on the type of business you own, the risks associated with the business, its location and the total value of the assets you wish to cover. If your business is highly specialised, it’s advisable to find an insurer who can offer the services of an underwriter. If you’re in the shipping industry, for example, you’ll know that marine insurance is complex and insurers are required to have an in-depth understanding of local and international conditions.
Underwriters are trained to evaluate and accept risks, control them, determine rates for policies based on those risks, and set cover conditions. An underwriter will not only be able to prepare an estimate that reflects the uniqueness of your business, but may also save you money. Short-term insurance deputy ombudsman Hendrik Viljoen offers some advice on estimates:
How do you estimate the replacement value of goods? You need to verify at least once a year what it will cost to replace all the contents of your business on a new-for-old basis. In the case of vehicles, motor insurance is based on the market value of the vehicle and needs to be adjusted more frequently, say every quarter.
How can overestimating or underestimating affect your claims? If you overestimate the value of items, you will be paying a higher premium than necessary as the sum insured has a big impact on the premium. If you underinsure then your claim will be affected by average, meaning it will only be paid proportionally. For example, let’s say you insure your office contents for R50 000 and the replacement value is R100 000. If you have a loss of R25 000 then only half of that amount (R12 500) will be paid. The Ombudsman will allow you some leeway – up to about 10% – without charging you a penalty.
How do insurers estimate the value of your goods when a claim is received? They estimate based on replacement quotes for contents and book value for motor vehicles.
How can insurers help business owners to estimate accurately? Some insurers employ professional valuators and it’s a good idea to use them. If you do it yourself, go through each office, department, warehouse or other location of your business and list all the items. Once you’ve done that, go to the stores or look at advertisements to establish a current replacement value.
For more information, contact the Ombudsman for Short-term Insurance on +27 11 726 8900, www.osti.co.za