FAQ: Fidelity Section — Commercial Cover

An important feature of the Fidelity Section that is often overlooked is the following feature (as per the policy wording):

Renewal of this insurance from period to period or any extension of any period of insurance shall not have the effect of accumulating or increasing the liability of the company beyond the sum insured stated in the schedule. If the period of insurance is less than 12 months the company’s liability is limited to the sum stated in the schedule during any 12-month period of insurance calculated from inception or renewal.

Example:

In a 12 month period of insurance, if insured has R100 000 cover and has a claim for R10 000, then the insured only has R90 000 cover for the remaining renewal period. If the amount is used up before the renewal period, then no further claims can be entertained.

The insured can, however, double their cover by asking for a Reduction/Reinstatement of Insured amount clause, which states as follows:

Reduction/Reinstatement of insured amount clause (if stated in the schedule to be included)

The payment by the company of any loss involving one employee or any number of employees shall not reduce the company’s liability in respect of the remaining insured employees provided that:

1. the maximum amount payable by the company for all insured employees shall not exceed double the sum insured shown in the schedule;
2. the insured pays additional premium calculated in terms of the following formula:

Annual premium in force at time of discovery of loss * (amount of claim payment / sum insured at time of discovery of loss)

The additional premium shall be payable in full and may not be reduced due to the period between the date of discovery of loss and the expiry date being less than 12 months.