Loadshedding has become a common phenomenon in South Africa and as home-, and business owners, policy holders have started to question the impact loadshedding has on their insurance policies; when they can obtain cover and under which particular section they can obtain said cover.
Santam discusses the damages and losses that can occur in the event of loadshedding:
- Damage due to the loss of electrical and electronic equipment and machinery resulting from power surges/spikes caused by the supply of electricity being switched on or off;
- Physical loss of, or damage to stock-in-trade (mostly refrigerated stock) due to the interruption of the electrical supply;
- Loss of income following the interference or interruption of business as a result of interruptions in the supply of electricity.
Fire Section
From the 1st of January 2015, Santam has extended the Fire Section wording of their policies to include R50 000 power surge cover on all Commercial, Guesthouse, and Tourism policies on all Denti- and Mediplex policies.
Damages regarding refrigerated stock resulting from an interruption in power supply can be insured by adding Clauses 2073 and 2074 to the policy.
Under Clause 2074, 1.3 it states that if the power surge causes a fire, the fire will be covered under this section.
Business Interruption Section
Business Interruption follows the Fire peril where power surge cover is now included.
Business Interruption cover is provided to Public utilities – extended cover, for businesses that have a greater dependency on electricity supply, such as restaurants, cinemas, theatres, as well as areas where load shedding occurs more frequently.
Public Utilities – extended cover
- This cover makes provision for the interruption or interference of business due to total or partial failure of the public supply of electricity to insured premises.
- In the event where loadshedding occurs as a result of insufficient capacity at the electricity generation unit, no cover will be in place.
- Cover will be in place subject to the 24-hour exemption period in the case of interruption due to the direct result of damage to property and/or equipment of the electricity generation unit.
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In the case where a power surge causes a fire, a reduction in turnover and increase in cost of working will be covered in relation to Santam’s The Impact of Load Shedding on Insurance 1.3; 2.2 and 3.3.
Theft Section
Insureds will be indemnified by Santam in the event of systems failing to operate as a direct result of loadshedding. In the event that the response company could not react to the alarm signal due to an interruption in the supply of electricity, the same principle will apply. Most residential and industrial alarm systems’ back-up batteries are capable of lasting up to 6 hours. Policyholders should therefore ensure that their alarm system’s batteries are tested regularly.
Business All Risks Section
Power surges are covered as no exclusion applies to the loss or damage to the insured property irrespective of the cause thereof.
Accidental Damage Section
Machinery and equipment (excluding electronic equipment that is ensured in terms of the Electronic Equipment section and machinery insurable in terms of the Machinery Breakdown section) insured in terms of the Fire Section, exceeding R50 000, will be covered in terms of this section if the damage is caused by power surges.
Electronic Equipment Section
Power surges are covered regardless of the cause thereof and it is imperative that brokers ensure that policyholders do indeed protect their equipment with necessary surge arrestors.
Homeowners Section
Unless additional cover is taken out, no cover is provided in respect of power surges unless caused by insured perils such as lightning or thunderbolts.
The following limited cover is available and optional:
- Accidental damage to machinery:
“Sudden and unexpected damage to machinery, used solely for domestic purposes, of swimming pools, jacuzzi’s, boreholes [excluding windmills], sprinkle irrigation systems, electric gates and garage doors. The machinery must be installed on the premises of the insured buildings.”
Householders Section
Unless additional cover is taken out, no cover is provided in respect of power surges unless caused by insured perils such as lightning or thunderbolts.
The following limited cover is optional (the insured must select this option and pay an additional premium):
- Accidental damage:
This extension will provide cover against power surges, irrespective of their cause.
Machinery Breakdown Business Interruption Section
The reduction in turnover as a result of loss and damages will be insurable under this section if an insured in indemnified for the loss of or damage to machinery that has been insured in terms of the Machinery Breakdown section.
Deterioration of Stock Section
As insured in terms of the Machinery Breakage section, cover is only provided for the deterioration of stock following damage to machinery.
