- A policyholder discovered her stolen ring would be replaced for far less than the amount insured, highlighting how outdated valuations can distort expectations at the claim stage.
- The dispute underscores that the sum insured is a maximum liability, not a guaranteed payout. If an item can be replaced for less, the insurer’s obligation is limited to that lower amount.
- Jewellery may appreciate over time, but without regular valuation updates and accurate sums insured, consumers risk either overpaying premiums or facing disappointment when claims are settled.
Why was the insured amount not the payout
Edite Teixeira-Mckinon, Lead Ombud of the Non-Life Insurance Division, explained that disputes frequently arise when consumers equate the sum insured with a guaranteed payment.
“It is important to bear in mind that jewellery appreciates, technology depreciates, and replacement costs shift constantly. Without regular reviews, your cover may leave you dangerously exposed, turning years of paid premiums into little more than false reassurance,” she said.
In this case, the insurer maintained it could replace the stolen ring with an identical ring for R59 030. Under the principle of indemnity, an insurer must place the insured in the same financial position they were in before the loss, no better and no worse. Because the replacement cost was lower than both the insured amount and the valuation certificate, the insurer argued its liability was limited to that lower figure.
“Our office agreed that the insurer had met its duty to indemnify, in other words, its obligation to put the complainant back in the same position she was in before the loss,” Teixeira-McKinon said. “The complainant accepted the settlement and the premium refund.”
The insurer also offered to refund the difference in premium linked to the higher insured amount, acknowledging that the policyholder had effectively been paying for cover beyond the ring’s actual replacement cost.
The hidden risk in ring insurance
“The lesson learned is that the sum insured is not a guaranteed payout; it’s the maximum the insurer will pay. If the replacement value of an item is lower, the insurer’s liability is limited to that amount. Consumers should regularly update valuations and sums insured to avoid disputes and ensure the cover reflects current replacement costs,” Teixeira-McKinon said.
She further emphasised that insurance requires active management by policyholders. “Outdated valuations can leave you underinsured and facing financial shortfalls when disaster strikes. The lesson is, review and update the value of your home contents regularly.”
Insurance, she added, is not merely about paying premiums but about ensuring the cover reflects reality. “By keeping your cover aligned with current replacement costs, you safeguard your peace of mind and ensure that, should the worst happen, you are in a position to recover financially.”
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