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Calculate averages

Why accurate Insurance cover matters

Understanding the Average Clause — and Why It Can Cost You

Many Body Corporates only discover the impact of under-insurance after a loss occurs. One of the most misunderstood (and costly) aspects of sectional title insurance is the Average Clause.

If your property is not insured for its correct replacement value, your claim payout may be reduced — even if the loss is partial.

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R900,000.00

What the unit is insured for

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R1,400 000.00.

However, the unit’s correct replacement cost

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R650,000.00.

There is a fire and the cost of damages and removal of debris

For Example

Theft of gate motors
Intercom systems
Air-conditioning units
Security surveillance camera equipment
Electric fencing
Energizers
Satellite dishes and aerials
Solar panels and heating equipment
Fire extinguishers and equipment, etc.

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In this case

The settlement calculation will be as follows with the application of the Average clause: If the average clause is applied by the insurer, the total the insurer will settle for a loss of R650,000.00 will be R417,857.14.

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Crucially Important

From the calculation, one can see why it is crucially important that the complex together with its common property is insured for the correct replacement value. Some insurers are providing limited cover for external fixtures and fittings.

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All Risk Cover

However, ALL Risk cover should be considered for any fixture or fitting located in the open that may potentially be subject to theft, attempted theft, malicious damage or vandalism.

Other Factors that affect Insurance

Improvements

Insured values must be adjusted when additional items are added or improvements are made to the property or common property. For example, wooden flooring. carpets, pools, Jacuzzis, refurbishing of kitchens or bathrooms, the addition ofan entertainment area, etc.

Subsidence Cover

Generally, most policies give limited subsidence cover. However, this cover is excluded where there are active soils such as clay, dolomite and similar soil types that contract and expand due to the moisture content or water content of the soil. This means that there will be no cover for Subsidence and Landslip in these areas.

Your Responsibility

The Body Corporate’s insurance does not cover contractors or loss or damage caused by them on site. It is strongly recommended that the Body Corporate only allow contractors with the correct Liability Cover to work at the property. It is further suggested that compliance in terms of OHS Act be taken seriously.

Fire Equipment

Fire fighting equipment or prevention equipment must be maintained in working order and serviced annually as required. One must monitor regulations and the changes to these regulations where additional equipment requirements have been added to the regulation.

Risk Alterations

Owners and Trustees have a responsibility to advise the insurer of any increased risk that would affect the underwriting or premium rate or cover itself. For example, Businesses being run from the unit, storing flammable or explosive materials on-site, section extension or renovations, etc

Maintenance

The buildings should be properly maintained at all times to reduce the risk of failing roofs, waterproofing, collapse of walling, the prevention loss or injury, etc.

Structures

All structures must adhere to building regulations and standards, retaining walls are specifically excluded from cover.

Disclaimers

Proper signage and appropriate disclaimer boards should be prominently displayed at entrances and particularly around swimming pools, visitors parking, stairs, etc.