FINANCE
HOW A CLAIM IS PROCESSED
Although the above events resulted in claims being lodged with the South African Special Risk Insurance Association ( SASRIA ) for the former and with the insurance companies for the latter , the principle of being adequately insured is the same .
The VAR is the estimated amount required to repair or reinstate the buildings to their original condition at prices applicable as at the date when such damage occurred . The SI refers to the amount stated in the policy schedule together with any specified allowances . The RE is the amount calculated to repair or reinstate the buildings inclusive of all costs , fees , and escalation up to the completion date . The VAR and the RE are usually prepared by a professional quantity surveyor
on behalf of the insurance company at the time of the claim .
WHEN YOU ARE UNDER-INSURED ?
The recent events have shown that there are many instances of building owners being underinsured and hence having a shortfall to reinstate their buildings . Should the VAR be the same or close to the SI , then the pay-out will be relative to the RE . However , should the SI be lower than the VAR then the condition of Average will apply which results in a pay-out shortfall which can sometimes be substantial . Average is applied when the value of the fixed improvements , at the time of damage or destruction , is greater than the insured value . Under such circumstances , the insured is responsible for a proportionate share of the loss .
100 SEPTEMBER 2022 SA Real Estate Investor Magazine