Contents Insurance: You think you know, but you have no idea
Contents insurance compensates the policy holder for goods and possessions that are not permanent fixtures of your home. But hold on, this is not always the case despite the common perception that contents insurance is the easiest form of insurance to calculate.
Let’s say that your bedroom erupts into flames and destroys the entire room. First off, you would pray that everyone is okay but after that you would begin to go over the total damage. Little did you know, the insurance broker would force you to fill out two different forms. You would fill out one for damages to permanent or built in appliances, and another for goods that could be moved. Chances are you have little to know permanent fixtures in your bedroom so it’s all defined as “moveable” goods. Is that even covered in your policy? You would be surprised to see how many do not include it.
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.
Learn about other factors that fluctuate your house contents insurance costs, such as location of property, security systems, how often it’s attended, and history of previous claims. Most insurance companies allow you to tag on “add ons” which guarantee the coverage of minute details such as covering goods inside sheds and garages.
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.
Do you really own that many prized possessions? If you do, than replacement value and a high premium is necessary. If not, a higher premium is only needed if you really wish for the extended coverage. However current market value can really rip you off, so try to avoid a very cheap rate.
It’s a simple formula. Pay a higher premium and your goods are covered much better than if you pay a low or very cheap premium. If you really want strong protection, you must pay a lot even if the chances of destruction or theft are very low.
Unless you have a lot of extremely valuable goods, stay with a fairly low premium. Chances of your home getting destroyed are low and the value of your property might not be that much to begin with. Keep in mind that an average family making over $200,000 pays on average 3% of that number back to insurance companies.
Graham McKenzie is the content Syndication Manager at insurance123.co.zaSouth Africa’s leading Household Insurance information portal
