Contents Insurance: You think you know, but you have no idea

Contents insurance is a popular form of insurance that calculates the total cost of all your important and vital possessions. At first glance, contents insurance appears easy to dissect and calculate. However that is a little nave to think, as contents insurance has several “grey areas.” Ask all these questions before calculating a number.

For example, if your kitchen caught on fire and completely destroyed the room, what would happen next? Well, the policy holder would have to fill out two separate claims. The first claim would represent the kitchen units and any other built-in appliances. On the second claim you would list off appliances like a refrigerator or dishwasher. You might be surprised by that fact, but those two appliances are not considered an integral part of the kitchen and can be moved.

Fires, floods, and theft represent the three primary reasons for why household goods are damaged. Also worth mentioning are trees falling on your house or vehicles colliding into your wall. Make sure you check with the insurance company to find out exactly what disasters they do and do not cover.

Insurance companies will also consider “add-ons” which incorporate coverage of insuring goods stored outside the house, such as in a garage. Factors that commonly affect house contents insurance costs are the location of the property, its security systems, whether it is left un-attended for long periods, and history of previous claims among others.

Another area many insurance companies can quickly skip over is whether your prized possessions are covered for replacement value or current market value. You want to have replacement value if you really have key household items that you hold dear to your heart. Yes the premium is much higher, but the coverage you receive in case of damages is much higher.

However, current market value is when the insurance company assesses home possessions to current value and not what it was worth five to ten years ago. So if you have possessions which are quite old and you want to protect their worth, make sure you get replacement coverage.

Replacement coverage is much more expensive, so you can expect high premiums. It comes down to protecting for the future or for something that may or may not ever happen. On average, people who take out house contents insurance also look at the cross section of the value of their possessions losing money.

Contents insurance does not need to be outrageous because you and your house probably aren’t made of gold. Keep in mind that an average household makes $200,000 a year and spends 3% of that total income towards insurance. Spend your money wisely towards insurance and the coverage will stay as strong as more expensive policies.

Graham McKenzie is the content Syndication Manager at insurance123.co.zaSouth Africa’s leading Household Insurance information portal

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