Edite Teixeira-Mckinon, Lead Ombud of the Non-life Insurance Division of the NFO

Outdated contents values

Insurance is meant to be your safety net, but for some policyholders that net unravels when it matters most.

The Non-life Insurance Division of the National Financial Ombud Scheme (NFO) says too often people discover after a fire, flood, or theft that the payout they receive is far less than expected because the value of their home contents was never updated.

Home contents insurance protects your personal belongings inside the house, such as furniture, appliances, clothing, and jewellery. It differs from building insurance, which covers the physical structure of the property.

Edite Teixeira-Mckinon, Lead Ombud of the Non-life Insurance Division of the NFO said disputes arise when consumers are dissatisfied with the insurer’s settlement offer after making a claim.

“It is important to bear in mind that jewellery appreciates, technology depreciates, and replacement costs shift constantly. Without regular reviews, your cover may leave you dangerously exposed, turning years of paid premiums into little more than false reassurance,” she said.

When it comes to home contents insurance, the amount you receive after a claim is not always straightforward. Several key factors determine the final settlement, and understanding them can help you avoid unpleasant surprises:

Underinsurance

Underinsurance occurs when the contents are not insured for their full, up-to-date replacement value. In such cases, insurers may apply the principle of average, meaning the payout is reduced proportionally. To avoid this, consumers must ensure that the sum insured, which is the maximum payout in the event of a claim, accurately reflects the current replacement value of all household contents. Regular reviews of the sum insured are essential to keep it aligned with rising replacement costs.

Replacement Value

Contents policies typically cover the replacement cost of an item, not its original purchase price. Because most household items depreciate over time due to wear and tear, the replacement cost is often lower than what was originally paid.

However, not all items depreciate. Jewellery, for example, may increase in value as the price of gold and precious gems rises. Consumers should update the sum insured to reflect these changes, or risk receiving a lower payout for valuable items.

Proof of Quantum

The responsibility lies with the consumer to prove the value of items claimed. This usually requires proof of ownership or purchase. Older items or gifts often present challenges as documentation may be missing. Some insurers may still settle such claims at an entry-level value, which is usually less than the amount claimed. Importantly, consumers must never submit false or inflated documents. Doing so could lead to the insurer rejecting the entire claim under the total forfeiture clause, which is standard in most policies. Even one fraudulent item can invalidate the whole claim and lead to the insurer cancelling the policy.

Dispute Over Ring Insurance Settlement

Teixeira-Mckinon cited a case study of a complainant who challenged her insurer’s settlement after her ring was stolen. She asked for a cash payout, and the insurer offered R59 030 based on a replacement quote from its service provider. The complainant argued this was far below both the sum insured (R155 000) and her jeweller’s valuation certificate (R125 000).

The insurer explained that the sum insured is only the maximum liability. If the actual replacement cost is lower, the insurer’s obligation is limited to the replacement cost. Since it could replace the stolen ring with exactly the same ring for R59 030, the insurer maintained its offer was fair. To address the gap between the settlement and the sum insured, it also offered to refund the difference in premium.

“Our office agreed that the insurer had met its duty to indemnify, in other words, its obligation to put the complainant back in the same position she was in before the loss. The complainant accepted the settlement and the premium refund.

“The lesson learned is that the sum insured is not a guaranteed payout - it’s the maximum the insurer will pay. If the replacement value of an item is lower, the insurer’s liability is limited to that amount. Consumers should regularly update valuations and sums insured to avoid disputes and ensure the cover reflects current replacement costs,” said Teixeira-Mckinon.

She added that insurance is not just about paying premiums - it’s about making sure that your cover truly protects what matters most.

“Outdated valuations can leave you underinsured and facing financial shortfalls when disaster strikes. The lesson is simple: review and update the value of your home contents regularly.

By keeping your cover aligned with current replacement costs, you safeguard your peace of mind and ensure that, should the worst happen, you are in a position to recover financially,” Teixeira-Mckinon said.