By: Jonathan Lindeque, Divisional Executive: Agriculture and Food at GIB

South Africans are dangerously underinsured and the consequences can be financially devastating. Whether it's damage to a home, loss of personal belongings, or major agricultural losses, too many individuals only discover gaps in their coverage when it's far too late.

In many cases, policies don’t reflect the true value of assets, leaving policyholders out of pocket when they need help the most. Jonathan Lindeque, Divisional Executive: Agriculture and Food at GIB, says that at the heart of this issue are two key problems: a widespread lack of understanding about how insurance works, and a deep mistrust in the industry itself.

“Insurance feels like a luxury for many South Africans, but the risk of being underinsured or uninsured entirely is far more costly in the long run. One incorrect calculation or overlooked item could mean a reduced payout, an inability to replace vital equipment, or even insolvency,” says Lindeque.

The real risks of underinsurance

“If your business suffers a fire, flood or theft, and you’ve under-declared the value of your assets or used outdated figures, you’ll only receive a partial payout,” Lindeque explains. “Even more concerning is underinsurance in business interruption cover. Clients often default to accounting gross profit instead of using the correct insurance definition, and this is where we see the biggest gaps and the highest claim shortfalls.”

Add to that a widespread reliance on outdated asset registers, cost-saving attempts that leave out VAT (whether intentional or otherwise), or failure to include new equipment, and the implications may be catastrophic for businesses.

On the personal side, many individuals mistakenly insure items at their original purchase price or depreciated accounting value rather than their current replacement cost. “People often don’t realise that they should be insuring their fixed assets at replacement value, vehicles at retail value plus extras, and movable equipment at market value,” says Lindeque. “It can be confusing, even for financially savvy clients, which is why having a trusted broker is so important.”

Why insurance values go stale fast

Inflation and technological changes mean that the cost of replacing assets increases every year. While insurers typically apply inflationary increases between 6% and 15%, it’s ultimately the insured’s responsibility to make sure their cover keeps up.

Lindeque adds: “We recommend an on-site valuation every three years and a desktop valuation in the in-between years. And if you’re ever unsure, slightly over-insuring is always a safer bet. The difference in premium is often negligible, but the impact on a claim can be massive.”

Bridging the knowledge gap

Despite efforts by some insurers to simplify policy language, insurance remains a minefield for many. The fine print, technical terms, and complex conditions often leave people unsure of what they’re actually covered for which is why brokers are not just helpful, but essential.

“A good insurance broker doesn’t just sell you a policy, they help you apply it to your life or business,” says Lindeque. From guiding clients through declarations to recommending asset valuations and calculating accurate business interruption figures, brokers translate jargon into practical protection.

Even small administrative oversights such as forgetting to remove sold items or failing to add new purchases can lead to incorrect cover and costly consequences. The annual renewal period is more than a formality; it’s a critical opportunity to reassess and make sure your sums insured still reflect reality.

In a tough economy, it may be tempting to trim insurance costs, but cutting corners could prove far more expensive in the long run. Now is the time for individuals and businesses to take a hard look at their risk exposure and make sure they’re truly protected when it matters most.