The Insurance Mistakes South Africans Make Every Day — And How to Fix Them

Most people only find out their short-term insurance has a gap in it the moment they need to claim. By then, it’s too late to fix — the burglary has already happened, the geyser has already burst, or the surge has already taken out the TV, the fridge and the router in one go.

The frustrating part is that most of these gaps are small, easily fixed oversights. Here are the ones we see most often.

What Short-Term Insurance Actually Protects

Short-term insurance (also called personal lines or domestic insurance) generally covers:

• Buildings — the physical structure of your home, including fixtures like built-in cupboards, geysers and tiling, against damage from fire, storms, water and similar events
• Household contents — everything inside your home that isn’t part of the structure: furniture, appliances, electronics, clothing and more
• Portable possessions — items you take out of the house, like laptops, jewellery, cameras and cellphones, which need to be specified separately to be covered away from home
• Vehicles — cover for accident damage, theft, hijacking and (depending on the policy) third-party liability
• Liability — protection if someone is injured on your property, or you’re held responsible for damage to someone else’s property

Replacement Value vs Market Value

When insuring your home and contents, you’ll typically be asked to choose between insuring at replacement value (what it would cost to rebuild your home or replace your belongings brand new, today) or market value (what your property would sell for, factoring in depreciation and wear and tear).

For buildings cover, replacement value is almost always the right choice — rebuilding a home after a fire costs what it costs, regardless of what the property might have sold for. For contents, replacement value means a five-year-old TV gets replaced with a similar new one, rather than paying out what that old TV was “worth” on the second-hand market.

The Average Clause: The Hidden Penalty for Under-Insuring

This is one of the least understood — and most costly — aspects of short-term insurance. Most policies include an “average clause,” also known as co-insurance, which works like this:

For example: if your home contents are actually worth R600,000, but you’ve only insured them for R300,000 (50% of their true value), and you suffer a R100,000 burglary claim, the insurer applies the average clause and pays out only 50% of that claim — R50,000 — even though your insured amount (R300,000) is well above the claim itself. Many people assume that as long as their sum insured is higher than the value of any single claim, they’re fully covered. The average clause means that’s not how it works — your overall sum insured needs to reflect the true total value of everything you own, not just be bigger than your biggest expected claim.

Three Common Mistakes

• Under-insuring contents from the start. Many people estimate the value of their household contents far too low, often because they're thinking item-by-item rather than adding it all up — furniture, appliances, clothing, electronics, kitchenware, linen, tools, and so on. A proper room-by-room inventory usually reveals a much higher total than people expect.
• Not updating cover after big purchases. New furniture, a renovated kitchen, a new TV or a home office upgrade all increase the value of your contents — but your sum insured doesn’t update itself. If you don’t review and adjust it, you could find yourself under-insured (and caught by the average clause) without realising it.
• Forgetting to specify portable possessions. Standard contents cover usually only protects items inside your home. If your laptop is stolen from your car, or your phone is snatched in the street, it likely won’t be covered unless it’s been listed separately as a “specified item” or “all risks” item on your policy — usually for a small additional premium.

The Bottom Line

Short-term insurance is one of those things that’s easy to set up once and forget about for years — but your home, your belongings and your life change constantly. A periodic review of your cover, sums insured and the fine print around clauses like the average clause and surge cover can make the difference between a claim that’s paid in full and one that leaves you badly out of pocket.

Note: the guidance above applies broadly across short-term insurers, including Discovery Insure. We can help you review your existing short-term policies regardless of which insurer they’re with.