How to insure portable possessions correctly

We all have gadgets that we rely on for work and social purposes. Whether it’s your cellphone, tablet, or laptop, you need to make sure it’s covered in the event of loss or damage.

We have a look at how you can insure your portable possessions correctly, and we consider how depreciation in value can affect your insurance.

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Insure portable possessions for the right amount

Ayanda Mazwi, senior assistant ombudsman at the Ombudsman for Short Term Insurance (OSTI), says that each insurer has its own underwriting guidelines for portable possessions. It’s important, she notes, to discuss this cover during the underwriting process, and when you review your policy.

“Certain items will not be covered unless they are specified. In other words, you need to include a full description of the item and its value, and it needs to be noted in the policy schedule,” says Mazwi.

She points out that a significant number of complaints the ombud receives relate to claim settlement amounts offered by insurers.

“Contractually, it’s your responsibility to make sure that the risk is covered for the correct and full replacement value. The insurer has no duty to inspect the property or confirm its value during underwriting, since insurance contracts are based on good faith,” says Mazwi.

“If you don’t obtain cover for the correct replacement value, you may be underinsured. The insurer will only compensate you for the insurance that you have, and you will be responsible for the difference,” says Mazwi.

Don’t forget about depreciation

Mazwi says that the amount that’s noted in your policy is the maximum indemnity that the insurer will give for loss or damage – less the excess and any adjustment for under-insurance. 

“At the claim stage, it’s also important to remember that the value of your portable possessions may have depreciated over time. Therefore, the insurer is not obliged to settle your claim purely based on the sum insured,” says Mazwi.

She explains that short-term insurance contracts are contracts of indemnity. This means that the insurer’s obligation is to return you to the same financial position that you were in immediately before the loss or damage.

“The majority of complaints we receive for portable possessions involve electronic equipment. Their commercial value depreciates over time due to regular use and rapidly changing technology,” says Mazwi.

By extension of the principle of indemnity, where the risk item is no longer sold by the service provider – for instance, a particular cell phone – the insurer is permitted to settle the claim based on the replacement value of a similar device, not a better one,” says Mazwi.

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