Under-insurance occur when the amount for which the property is insured, is less than the value of such property.

Remember to insure your property for its replacement value and NOT for the purchase amount! (Unless it is new property!)

Where loss/damage occur, there are two insurers, namely:

* the Insurance company, and

* the Insured as his/her own insurer;

EXAMPLE:

Value of property...........................................R24 000

Sum insured..................................................R18 000

Difference (as his/her own insurer).................R 6 000

In event of loss/damage of R12 000, each of the "insurers" contribute as follows:

INSURANCE COMPANY:

R18 000/R24 000 X R12 000/1 = R 9 000

INSURED (as his/her own insurer):

R6 000/R24 000 X R12 000/1 = R 3 000

THUS: R9 000 + R3 000 = R12 000