Are you confused about what your insurance covers when it comes to appliance damage due to loadshedding? Is loadshedding insurance part of your policy?
In this article we debunk misconceptions and shed light on vital policy details to help you navigate the intricacies of claiming when your appliance stops working.
Does loadshedding insurance even exist?
The fact is that there is no such thing as loadshedding insurance. An appliance is not damaged due to “loadshedding”, but rather due to the power surge when the electricity is switched back on again.
As Ernest North of Naked Insurance explains, a power surge is an individual event which causes damage to an item.
North says you need to check your policy to see if you have cover for power surges. Naked, for example, includes power surge as standard in its policies, but some insurers may require you to take it as an additional cover. Furthermore, some insurers may insist on the use of surge protectors to validate your claim.
According to the South African Insurance Association (SAIA), what has changed over the past year is that more insurers now cover these events as an extension of the main policy, and a policyholder can choose whether or not to take this option.
“In earlier years, before intensified loadshedding, the cover for damage related to a power failure was regarded as “soft cover” in most policies, and was therefore included with no additional premiums in the policy,” says an SAIA spokesperson.
“That meant that these types of risks and claims experience were sufficiently low as to not require specific consideration or risk-adjusted insurance premiums.”
The risk of power surge damage has grown exponentially with the increase in loadshedding, and many insurers now have “power surge option following loadshedding as a proximate cause” as an extension of cover at an additional premium, including a separate excess for this cover.
It is usually subject to the policyholder installing risk-managing mechanisms such as surge protection.
Wear and tear vs power-surge damage
Issues arise when appliances sustain damage due to wear and tear rather than a single power-surge event.
North explains that if wear and tear is identified as the cause, your claim may be deemed invalid. A significant portion of claims are in fact denied because wear and tear was identified as the cause, which is why there have been many complaints about insurers not paying out for “loadshedding”.
Wear and tear is caused by appliances continually switching on and off and is worse for appliances such as fridges, freezers and gate motors. Unexpected power interruptions mid cycle can shorten the lifespan of appliances such as washing machines and dishwashers.
North says fridges and freezers are breaking down prematurely, with lifespans reduced from 10-15 years to a mere three years. However, it’s essential to differentiate between malfunctions related to wear and tear and those caused by power surges,.
While your insurer may require the installation of a power surge protector, it won’t shield your appliances from increased wear and tear. To safeguard vulnerable appliances like fridges or garage motors, North recommends investing in an uninterrupted power supply. Remember to consult the loadshedding schedule before starting your dishwasher or washing machine for added protection.
The one silver lining is that that geysers are covered for wear and tear and, according to North, you could still lodge a claim if your geyser malfunctions.
Questions to ask your insurer
SAIA suggests that you contact your insurer and get answers to the following questions
- Do you cover damage to an appliance due to a power surge?
- If it is covered, what are the limitations to that cover?
- What conditions or requirements are applicable to such a risk being covered and to remain in force for the duration of the policy?
- How much is the premium for a power surge to be covered, as well as other damage following loadshedding?
- What is the applicable first amount payable (the excess) for such cover?
Your insurer has the right to change your policy cover or premium at any time during the contract, as long as they give you 30 days’ notice. However, most insurance companies, when announcing the changes, have stated that it will only come into effect on the anniversary of the existing policy. If you’re not happy with the changes that your insurer is making to your existing policy, you are entitled to cancel your policy and move to another insurer.
Insurance and grid failure
Insurers now exclude cover for consequential loss, such as business interruption (BI) and financial loss where there has been total or regional failure of the grid. Many insurers have also excluded physical loss or damage to insured property following a grid failure event. It is important to note that this exclusion does not, however, relate to power surges after an ordinary loadshedding event.
To explain why insurers made this decision, it is important to understand that all insurance companies in South Africa re-insure their risks with large global insurers. According to SAIA, global reinsurers regard damage due to any event where there would be a claims rate of 100%, or close to it, as uninsurable.
To provide context, a power surge that wipes out the appliances of a single household could result in a claim of anywhere from R60 000 to R100 000. The fear is that when the grid comes back online it would cause a massive power surge that affects all households at the same time. That means every insured household would be claiming tens of thousands of rands from their insurer. That would be billions of rands worth of claims all on the same day. No insurer could meet those volumes which means it is effectively an uninsurable event.
This article first appeared in City Press.