21/05/2026
🛡️Protect Your Property from Underinsurance
🏠Don’t Rely Solely on Municipal Valuations
Many property owners mistakenly believe that their municipal valuation reflects the amount they should insure their property for. In reality, municipal valuations are primarily used for rates and taxation purposes and often do not reflect the true rebuilding cost of a property.
Building costs increase over time, and replacement values should take the following into account:
• Current construction costs
• Demolition and debris removal
• Professional and architect fees
• Compliance with updated building regulations
• Inflation and rising material costs
🏠Why This Matters
A building that cost R2,000,000 to construct 20 years ago may now cost R8,000,000 or more to rebuild. Once additional costs are included, the total replacement value could easily reach R9,600,000.
If that property is only insured for R5,000,000, it would be significantly underinsured.
🏠The Impact of Underinsurance
Most insurance policies apply the “average clause” where a property is underinsured. This means the insurer may only settle claims in proportion to the amount of cover in place.
Example:
• Correct replacement value: R9,600,000
• Sum insured: R5,000,000
• Storm damage claim: R200,000
Because the property is insured for only approximately 52% of its true replacement value, the insurer may only pay approximately R104,000 of the claim - leaving the property owner responsible for the remaining R96,000.
💡Smart Cover Tip
Review your building sums insured regularly and ensure they are based on accurate replacement values - not municipal or market valuations. Adequate cover today can help prevent significant financial strain tomorrow.
If you are unsure of your cover please feel free to contact us and we will gladly assist:
🔹Tel 043 726 5321
🔹Email [email protected]
🔹www.halcyongroup.co.za
With reference to material provided by Rocksolid Risk & Maintenance Management.
