Under no circumstances should the Insured be seen to benefit by way of an improvement as the policy is supposed to indemnify the Insured.

 

Insurance principle of indemnity

Under the insurance contract, there is the principle of indemnity which means security from damage / loss or compensation for loss/ injury.

To indemnify is to protect by paying the cost of damage i.e. the insurers’ act of placing the insured in the same financial position after a loss that he was in immediately prior to the event.

For the insured to be properly indemnified, he must be properly insured.

Dollarisation has brought with it stability which if all the economic fundamentals fall in line will help in maintaining portfolios thereby granting the Insuring public security of existence and improving confidence level in the product.

Examples of how to arrive at the correct sum insured

 

Domestic and commercial properties

The cost of reinstatement of the property includes the demolition and disposal of debris, re- establishments of site and all associated costs of rebuilding. Very often, the mistake is made when rebuilding costs are considered without providing for incidental charges that normally arise in the execution of construction projects.

The premium payable is calculated on the gross estimate on the gross figure.

 

Motor vehicles

Motor vehicle values are based on the open market value which is “the amount of money which can be obtained for the (article) at a particular point in time from persons willing and able to purchase it in an informed market” (“Modern Methods of Valuation”).

Information on prices of second hand vehicles can easily be obtained from second hand car market dealers. Unlike the South African market which ha been able to establish a motoring magazine, the Zimbabwean market at this point in time has to rely on second hand market car dealers, Motor vehicle assessment centres and valuers.

 

Plant and machinery

The New Replacement Value including the cost of dismantling/disposal and re-erection/acquisition of a replacement unit is used to value plant and machinery.

The cost of a new item on its own is not the correct value for insurance. The intention of the insurance is to indemnify the client. Thus all costs associated with the restoration of an item to its state of service are to be taken care of.

It must however be observed that since it’s a contract of indemnity, one will not get a new boiler following a loss. A reasonable amount of depreciation will be considered in the event of a total loss. This does not however apply to partial losses which are normally taken care of in full subject to terms and conditions of the policy unless the policy sum insured was not correctly stated.

In conclusion, it is imperative that people and organisations take comprehensive policy packages as they provide:

• Peace of mind
• Risk surveys
• Stimulation of business contingent plans
• Promotion of business continuity
• Indemnit