Under insurance causing high inflation

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Under insurance causing high inflation

Macro factors like inflation and rising import costs on a weaker Rand can drive up replacement values of many household items, from audio equipment to furniture and appliances. Macro pressures increase the risk of under-insurance.

Consumers have a slow response to under-insurance risks because years of relatively low macro pressure may create false expectations of price stability. Recently CPIX topped 9% for the first time since 2003 and the rand is again at record lows against major currencies after 2001. Authorities enjoyed major success in keeping inflation within the targeted 3-6% range.

Such incidents cause policyholder not to have the ability to replace stolen or damaged items for anything close to the purchase price of three or four years ago. This causes a gap between insured values and replacement values which should be the individual’s responsibility.

Policyholders should use the solution of calling in a professional short-term insurance adviser to carry out a thorough review of replacement values.