Asset
An asset can be defined as anything that has a financial value. It is property or a financial commodity which can be converted to cash. Examples are buildings, personal belongings such as jewellery, equipment such as a personal computer or camera, valuable art collections or your car. In insurance terms when the policy document refers to the insured asset it means the item you have insured. When you have a house owners policy the asset you have insured will be the house you own. In car insurance the asset will be the car you insured.
When reference is made to the assets of the insurance company itself, we refer to the property it owns as well as investments and other assets. The premiums that the insurance company collect monthly from policy holders are invested in various assets as prescribed by law. The words liquid assets refer to assets that can be turned into cash quickly such as bank deposits. Fixed assets, on the other hand, are assets such as buildings. Even though it can be sold and therefore turned into cash, the transaction will take time.
Loans against assets must be deducted to establish the net value of the asset. Let’s say your car is valued as R500 000 but you owe R200 000 on it, your net value will be R300 000. But, when you insure your car, you must insure the full value of the car, that is R500 000.
You cannot insure an asset if you are not the owner of the specific asset, for example you cannot insure your neighbour’s car, but you can add your spouse and children’s assets to your insurance policy.