Insurance Advice Needed (Average Clause)

[Tomik]

Hey guys, I'm hoping you can help me. 

My insurer, Santam, just renewed my policy but noted the "average clause", in particular stating that the sum insured must represent full replacement value of the assets in accordance with the basis of valuation applicable.

Now, here's the rub. I bought my BMC used (1 year old) for R124000 but the replacement value for a new one is R200000. I specifically told my broker that I bought the bicycle used for R124000 (and provided an invoice) and insured it for that amount. In the event of a total loss (i.e. theft), I expect to be paid out R124000 less the excess, as I will purchase another used bicycle for the same amount. But the average clause implies that I am under-insured.

What is the general experience here? Do you insure for the price paid, or the new replacement value? Has anyone been paid out less than the insured amount due to this "average clause"?

Thanks in advance.

 

[Danger Dassie]

@Patchelicious could probably answer. 

[Edge_Design]

Depending on what you are covered for (all risks, theft etc), if you claim for a set of wheels and not the full bike then expect to receive 60% of the value and not the full value (any claim for a part of the bike would be paid proportionately). I guess that is what you are looking for so not an issue. People probably get upset when they claim for a R10k part and only get R6k less excess in return even though the item is insured for R120k in total.

 

I'm not an expert but that is my understanding.

 

Edited July 7, 2021 by Edge_Design

[RookieSports.co.za]

The average clause should not affect you when total loss is experienced.

It may however affect you if you claim for just a wheelset.

Example: If you claim R30000 for a replacement wheelset then Santam may only pay out 62% of that (your current cover is only 62% of the list value). 

This is based on that Santam has the full bicycle for R200000 and the wheelset is R30000 of that amount. 

Should the list price for the wheelset be R50000 (based on the full bicycle price being R200000) and you get a replacement wheelset for 62% of that price then they should pay out the full 62%.

[Patchelicious]

8 minutes ago, Tomik said:

Hey guys, I'm hoping you can help me. 

My insurer, Santam, just renewed my policy but noted the "average clause", in particular stating that the sum insured must represent full replacement value of the assets in accordance with the basis of valuation applicable.

Now, here's the rub. I bought my BMC used (1 year old) for R124000 but the replacement value for a new one is R200000. I specifically told my broker that I bought the bicycle used for R124000 (and provided an invoice) and insured it for that amount. In the event of a total loss (i.e. theft), I expect to be paid out R124000 less the excess, as I will purchase another used bicycle for the same amount. But the average clause implies that I am under-insured.

What is the general experience here? Do you insure for the price paid, or the new replacement value? Has anyone been paid out less than the insured amount due to this "average clause"?

Thanks in advance.

 

That part.

Yes, its flawed, and yes it encourages fraud, but in short that's the standard practice. 

[Tomik]

Thanks for the replies so far. Funnily, me broker's assistant just got back to me (after a week) saying that the average clause does not apply to all risks insurance (it was above the all-risk section, below the building section. So she said that if stolen, I would get the inured amount less excess.

She also said damaged items (in a crash) would be replaced - i.e. full replacement cost paid out (less excess).

She said this section below is to manage expectations but if I understood that I would get paid out less than new replacement value, that's OK.

So I guess the question now is, if anyone has been insured for second hand value, is that what was paid out?

[DieselnDust]

you have to insure the bike for its NEW replacement value if you want to get paid out anywhere near what you actually paid for the bike.

 I bought a bike in 2015 by sourcing frame and parts independently and at a huge saving. When I insured it I had to insure it for the full replacement value (new) and I have to update the replacement value every year, every 6 months at the moment with prices skyrocketing.

As Patchelicious says, its not ideal and encourages fraud but that's how the underwriters have structured the cover. In a way the logic isn't that strange as the premium for a R200k bike is going to be around 1% of the value so about R2000 per month which is already going to discourage people from buying or specifying the bike at full value on the schedule.

[jock_the_GIANT]

The average clause is not applicable on all-risk items. It is only applicable for Buildings, House content, and in a way vehicles.

If you insured is for R124 000 they will only pay you R124 000 for a total loss. If the wheels get stolen, they will pay for the replacement of the wheels. 

I would insure at replacement value. Just saves you the hassle of looking and fining a second hand bike.

 

[Tomik]

1 minute ago, jock_the_GIANT said:

The average clause is not applicable on all-risk items. It is only applicable for Buildings, House content, and in a way vehicles.

If you insured is for R124 000 they will only pay you R124 000 for a total loss. If the wheels get stolen, they will pay for the replacement of the wheels. 

I would insure at replacement value. Just saves you the hassle of looking and fining a second hand bike.

 

Thanks for the reply! But I quite enjoy buying used bikes. In fact, of the 13 bikes I've owned, only my first two - an R800 avalanche and a R1200 wheeler - were new. 

[ChrisF]

Some seriously DANGEROUS advise .....

 

Speak to your BROKER (not an assistant).

 

Then go to a bike shop and get a written quote, and put this on record with your BROKER.

 

 

PS - I bought a 2019 model at the start of 2020, thus with a very good discount.  NOPE !!  The insurance was NOT interested in my "proof of purchase, ie purchase price", I had to get a written quote for the replacement value.

 

PPS - Also Santam, via a broker

Edited July 7, 2021 by ChrisF

[ChrisF]

4 minutes ago, Tomik said:

Thanks for the reply! But I quite enjoy buying used bikes. In fact, of the 13 bikes I've owned, only my first two - an R800 avalanche and a R1200 wheeler - were new. 

I agree with your centiment about buying used bikes .... 

 

Sadly the insurance industry is a weird animal ....

[jock_the_GIANT]

 

4 minutes ago, Tomik said:

Thanks for the reply! But I quite enjoy buying used bikes. In fact, of the 13 bikes I've owned, only my first two - an R800 avalanche and a R1200 wheeler - were new. 

Each to their own. I would never buy a brand new car so I get where you are coming form. But if i had to replace my current bike, I would probably go new, unless I get a deal of a lifetime.

[RobertWhitehead]

Ya, I am bored and just wanted to increase my post count: It's like Chrisf said, what you paid for it is sometimes irrelevant coz you bought it for a better price than new. But it doesn't change the fact that if you had to get that exact same bike now it will cost you the full amount. So yes, you are underinsured and it needs to be adjusted to the replacement value and not the purchase price. I am currently sitting in the same boat, my bike is also insured @ around 50-60% lower than the true value. This needs to be rectified ????

[Sid the Sloth]

Does anyone know what the Discovery Insurance structure on bikes is like? I insured mine for the build value in parts as I sourced everything second hand. I am wondering what would happen if I crashed and needed new Canyon specific bars, for example?

[Mountain Bru]

Anyone have any idea what the story is with claims on Naked insurance? I just took a pic of my bike and told them how much it'll cost to replace it. But now I'm concerned about my situation is going to be if I ever claim. 

They seem pretty reasonable though compared to my previous insurance through a broker. Here's a link if you want a quote: https://www.naked.insure/?utm_source=naked_referral&utm_campaign=UKT79384

And I've heard stories of KingPrice insuring your bike for R1 if you insure your car with them. Anyone know anything about that?

[Trashy]

If I may add another question to this expanding thread, how does one go about getting a replacement quote on a rare bike that doesn't have dealers in the country?