Friday, January 1, 2010

Excesses (Page 23)

The excess is the first amount payable in respect of claims made. This is the amount that the insured pays towards the loss, or by my definition, “the uninsured portion.”
Usually R500 to R1,000 for the basic excess.
Geysers usually R1,000 with maximums where preferred plumbers not used
Higher excess if unit unoccupied for a period longer than 30 days
Higher excesses will apply to higher claimers
Recently, new sub rule 29.4 came into being which places the onus on the owner for any excess in respect of his or her section. Before this new rule, the body corporate would have paid the excesses for claims from an external source such as storm, wind, fire, break-in etc. The rule does provide for this by letting the owners choose by way of a special resolution, to determine which specified damage would be paid by the body corporate and not the owner under such circumstances. Addsure guides clients in this new important area, provides sample resolutions to client bodies corporate, holds regular workshops covering this aspect for trustees and managing agents and coaches client owners at general meetings when invited to do so.

Trustees may negotiate the excess structure . PMR 29. 1 (a) above …. subject to negotiation of such excess, premiums and insurance rates as in the opinion of the trustees are most beneficial to the owners, against……etc

Thus, the insertion of this clause in 2005 clearly mandates the trustees to manage the policy through negotiation of excess, premium and rate. Higher premiums may reduce excess and vice versa. If trustees are concerned about claims history and the impending impact of future premiums, higher excesses may thus be sought, of course, as long as this is, in the opinion of the trustees, most beneficial to the owners.
Reduction of excess or excess “buy-back” or “buy-down” may also be purchased via specialist sectional title financial services providers such as Addsure or Trafalgar Financial Services as examples.

This aspect, ie managing claims ratio, deciding upon correct excess and negotiating with the insurer form part and parcel of understanding the new rule 29.4. This is where a specialist insurance advisor really helps.

What if more than one section is damaged? See diagram / slide above. The R5,000 excess has to be proportionaly split between the owners in the same ratio as the cost of the damage per section. (see for workshops on this and other subjects).

See for a scanned Personal Finance article on excesses