Consumers need to be aware of and understand the specific warranty clauses in their insurance policies, particularly those related to valuables such as jewellery. These clauses often have strict requirements, such as keeping items in a locked safe when not being worn, and failure to comply can result in a reduced claim payout, says the Office of the FAIS Ombud.
It says clients of short-term insurance policies are often under the impression that declaring specified jewellery items and insuring them individually under all-risk cover will ensure that one will enjoy insurance coverage if anything happens to the insured items.
An all-risk benefit is where you specify a valuable item such as jewellery and pay a specific premium based on the item’s value so that you are compensated in the event of loss or damage outside the home. An item insured under an all-risk benefit requires that a valuation certificate and proof of ownership are provided.
The Ombud Office says valuable items such as jewellery often elicit a warranty that provides for certain requirements to ensure a valid claim. A jewellery warranty would normally depend on the value of the items covered under the policy exceeding a certain value. An example of such a warranty, per a recent complaint investigated by the Office, would resemble the following:
“It is required, and you warrant that any jewellery with a combined value exceeding R150 000 shall at all times, while not being worn, be kept in a locked safe securely attached to an interior brick or concrete wall or floor of the dwelling or such other place you might be resident at.”
The Ombud’s Office says this issue is particularly relevant at this time of the year when many people will be travelling.
Case studies
In a complaint being investigated by the Office, the complainant’s wife removed her jewellery and placed it in a bag in the overhead locker during a flight to avoid discomfort while sleeping. After arriving home, they discovered the items were missing. The subsequent claim, which was for a value of R785 000, was reduced to R150 000, and after the deduction of the excess, a net amount of R135 000 was paid to the complainant. The claimed amount was reduced because the warranty required the items to be locked in a safe when they were not being worn. The complainant submitted he was not warned about this clause by the representative.
The Office said it has noticed that the National Financial Ombudsman Scheme has also dealt with similar matters.
In one matter, the insured was on holiday when he went to the beach with his wife and baby. He placed his bank card, cash, watch and rings in his wife’s bag for safekeeping. The bag was placed in the baby’s pram while they were at the beach. Hours later, they went to a shopping mall, and when they opened the closed area of the pram, the bag was missing. The claim for the loss was rejected because the applicable policy clause stated:
“It is required, and you warrant that any insured watch, jewellery item, or precious stones worth more than R75 000 shall at all times, whilst not being worn, be kept locked away in a safe permanently attached to the interior of the residence, failing which theft cover shall be limited to that amount for each item and in total.”
In another matter, the insured wore her tennis bracelet to work. While at her desk, she realised that one of the links of the bracelet had broken and that the bracelet might easily fall off. Fearing she might lose the bracelet, she removed it from her wrist, wrapped it in a tissue and placed it in her handbag. During the afternoon, she had to go shopping for medication for one of her children. When she got home and opened her handbag, she realised that the bracelet was missing. Once again, the applicable policy clause stated:
“It is hereby warranted that all jewellery must be secured in an approved safe when not being worn, and loss to such jewellery must be consequent on forcible entry to such safe. It is a condition of the policy that jewellery must be checked every 24 months and that a current valuation certificate is provided at the time of loss.”
The Office points out that warranty clauses are commonly found in insurance policies, and consumers should take note of them. It advises consumers to contact their insurer or broker if they require any clarification or further information on their policy’s terms and conditions.
