When it comes to insurance, striking the right balance is key. You want to be sure you have enough coverage to protect yourself from unexpected losses, but you also don’t want to pay for coverage you don’t need. So, how do you know if you’re overinsured, underinsured, or just not sure?
Being overinsured means that you’re paying for more coverage than is necessary. While it’s great to have peace of mind, there’s no need to overpay for insurance that doesn’t provide extra value.
Being underinsured is the opposite problem: you don’t have enough coverage to fully protect yourself or your assets in the event of a claim. This can leave you vulnerable to out-of-pocket costs that could have been covered by better insurance.
Common signs of being underinsured include:
Minimal Policies: Perhaps you’ve chosen the most basic plan available to save on premiums. While that may seem like a good short-term solution, it can leave gaps in coverage when you need it most.
Low Coverage Limits: Your insurance might only cover a fraction of the actual costs in the event of a significant claim, such as a car accident or a natural disaster.
Outdated Coverage: If your lifestyle has changed, but your insurance hasn’t kept up, you could be underinsured. For example, if you’ve made major renovations to your home, your original homeowners’ insurance policy may no longer provide enough coverage.
Insurers will settle claims based on replacement value or rebuilding costs when it comes to buildings; and, more often than not, retail value for vehicles. There is therefore no benefit in over insuring as the premium will be based on the higher amount while the settlement will be as mentioned.
If you are underinsured however, you will, likely, be penalised and have ‘average’ applied to your claim. For example, if your household contents are insured for R250 000,00 and you suffer a loss, be it storm damage, fire, burglary or any insured peril, causing damage or loss in the amount of R50 000.00.The insurer may decide to value the entire contents, if, for example, they determine the replacement value of all your possessions to be R500 000.00, they will assume that you have self-insured 50% of your contents value and only pay you out R25 000.00 or 50% of your claim.
If you’re unsure whether you’re overinsured, underinsured, or adequately covered, consider the following steps:
1. Assess Your Needs: Review your current policies and coverage limits. Ask yourself whether they align with your current lifestyle, assets, and risks.
2. Get a Professional Review: An insurance broker can help you navigate the complexities of insurance and ensure you have the right level of protection. We can analyse your policies and help you adjust coverage based on your unique needs.
3. Understand Your Risks: Everyone’s situation is different. It’s important to understand the risks specific to your life, such as living in a flood zone or having a high-risk job, and ensure your insurance addresses those concerns.
4. Reevaluate Regularly: Life changes quickly—whether it’s a new job, a growing family, or an investment in property, make sure your insurance evolves with you.
Get a Professional Review with Anchorguard
Anchorguard can help you navigate the complexities of insurance and ensure you have the right level of protection. We can analyze your policies and adjust your coverage based on your unique needs, providing security and peace of mind.
By regularly reviewing your coverage and understanding your needs, you can avoid being overinsured or underinsured. If you're uncertain about where you stand, we're here to guide you through your options and ensure your coverage is a perfect fit.
Feel free to reach out if you need help evaluating your insurance needs. Let’s make sure you are protected—nothing more, nothing less.
