*** Make sure you’re paying for what you get…

*** Ask yourself this vital question: Are you covered...?

*** Your 7-point checklist for insuring right…

From the pen of Karin Iten

Dear Investment Academy Reader,

Picture this: You’ve just come home from a wonderful weekend away from it all. You push open your front door and put down your bags. But just before you can say, “Home, sweet home!” the chaos around you tells you there’s been a burglary.

Your next thought will probably be: “Thank goodness I’m insured!”

But are you certain you’ll be paid out as much as you expect? Chances are you won’t.

If you have insurance or are looking to update your policy, keep reading…

Nugget #1: The contract you sign is legally BINDING

The first thing you need to know is that when you sign an insurance policy agreement, you’re actually entering into a legal contract between yourself and the insurance company. This contract will state what’s protected, at what price and which terms and conditions are relevant – including what isn’t covered.

Now, you wouldn’t sign any other legal contract without going through it thoroughly, so don’t sign on the dotted line of your new insurance policy unless you’re fully aware of what it is you’re agreeing to.

Nugget #2: If the information isn’t 100% accurate you could receive NOTHING

It’s your responsibility to give the insurer the correct information and make sure the policy documents reflect your details accurately.

If you're not honest about the nature of your risk – like saying you have an armed response alarm when you actually don’t, the contract will be useless and you won’t be paid a cent for your claim. Similarly, if you under-value your goods – to save on insurance premiums – you may only be paid a small portion of the item’s actual value.

If you drive an older car, phone your insurance company and get them to adjust your premiums to take into account its current residual value. (They usually only do this on request so you’re probably paying much more than you should.) Depending on the value of your car and when last your premiums were updated, you could save up to R1,000 a year.

Nugget #3: If you don’t fulfil the conditions it’ll be to YOUR detriment

The conditions of insurance are particularly important – this details what you need to do from your side to ensure future insurance claims will be paid out.

For example, when I bought my new car, my insurer insisted that I fit a satellite tracking device before they’d cover me. For household insurance, your insurer may specify that you must have an alarm system and burglar bars on every opening window in your home. If it turns out that the small window in your bathroom was never secured, the claim may not be paid out in the event of a burglary.

Nugget #4: Keep your policy up to date!

Don’t assume, for instance, that if your cell phone's insured, you’re insured for all subsequent cell phones. Your policy may actually specify the make and model of the phone, and if you upgrade, your new unit may not be covered.

Also remember that valuables, like jewellery, collectibles and art, are “variable worth” items. This means that the overall worth of the item changes and you’ll need to update these prices more regularly. Jewellery prices, for example, fluctuate with the price of precious metals and inflation rate, so make sure you get them re-evaluated at least every two to three years.

Nugget #5: If any of your belongings are stolen outside the home you won’t be covered

Going back to cell phones, check whether your policy will cover it if it’s stolen from your desk at work or from the table in a restaurant? When it comes to insurance companies, theft and burglary are two very different things. A burglary is where there are visible signs of forced entry into your home. Theft is what happens to an asset outside of your dwelling. Insurance cover for items taken out of the home – cell phones, laptops, cameras, jewellery, etc. – is optional and costs extra.

Nugget #6: The lower your payments, the higher your excess

Make sure you understand what “excess” means. Excess is the amount you have to pay out of your own pocket when you make a claim. Some insurance companies may charge a higher monthly premium, but then your excess is lower, or vice versa – so don’t be seduced by low monthly premiums until you find out what you’ll be in for when you make a claim.

Remember, when it comes to buying insurance, be guided by the principle that your insurance cover should always put you back in the same position you were in before the loss.

The 7-point checklist for insuring your goods

* Keep an inventory of all your contents, their serial and model numbers.
Remember to keep the value current. If you don’t, you’ll end up receiving the value you insured it at eight years ago and NOT the replacement price of the item in today’s standards.

* Take photos or a “video” tour of your valuables
This way, the insurance company can’t dispute the existence of these items when it comes to replacing them.

* Scan your receipts and pictures into your computer and keep a copy of these records at the office
This way, should your possessions be destroyed by fire or flooding, or your computer's stolen, you’ll be able to prove the value of the item and your possession.

* If your policy requires that you have an alarm system or a smoke detector, ensure they’re in working order
Regularly check the battery and test these systems.

* If your insurance cover's subject to burglar proofing and security gates, this means that each and every window and door needs this
If you don’t, you’re coverage can be deemed null and void, and you’ll battle to get a fair settlement.

* Check the extent of your coverage
Some insurances (especially the cheaper ones), don’t include all types of coverage (flood, fire, theft, etc) into their basic policies. Instead, they consider some types as “optional extras”. So make sure you know what types of damages you’re covered for and what you’re not.

* And finally, don’t forget to add new items to your insurance when you buy them and remove those you no longer have
This way, you’re not overpaying your insurer and you’ll be able to replace your new items should something happen to them.

Hopefully, you’ll never have to deal with these situations. But, by following these tips you’ll ensure you aren't taken for a ride if you do.

Well, that's all from me this today, till next week, here's to your financial freedom…

Karin Iten
For the Investment Academy

Copyright(c) 2009 Fleet Street Publications Pty (Ltd)

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