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Protecting your personal assets

Why household insurance matters – and why combining cover saves you money

What you own is more than just stuff. It takes a lifetime to build up a collection of prized possessions so it’s important to ensure that you have enough financial support to repair or replace them in case they get lost, damaged or stolen. Let’s look at everything you need to know about household insurance and how you can save money when combining car, home and building cover.

What exactly are home contents?

People sometimes confuse household insurance (or home contents insurance) and building insurance (also called homeowner’s insurance). A simple example to know the difference is to think of the difference between the owner of a rental property and the tenant. A tenant owns all the furniture inside the house, whereas the owner (landlord) owns the actual building structure and everything around it.

The home contents should therefore be insured by the tenant and the actual structure by the landlord. Thus everything inside a house is known as its contents, and everything that is fixed – from a garage and pool pump to walls, fence and geyser – falls under building insurance. If you were to turn your house upside down, everything that falls out should be covered by home contents insurance!

Remember: Building insurance doesn’t include home contents insurance in South Africa. So, if you are renting, always get your own home contents insurance. If you are a ‘rentrepreneur’, you will also need household insurance, and additional cover against accidental damages and liability.

What does home contents insurance cover?

Home contents insurance covers everything in your house against theft, fire, malicious or weather damages (storms, flooding, lightning). If you would like these items to be covered for accidental damage as well – e.g. if you spill coffee on your expensive sound system – then additional optional cover can be taken out.

The personal items you carry with you such as your handbag, clothing, sporting equipment, etc are typically covered under ‘all risks’. However when it comes to tablets, cell phones, jewellery, laptops and bicycles, you need to specify the items in your policy. Specifying items means that each item will be listed with its model or serial number plus its value.

Stay up to date with home contents insurance valuations

Many people only do an evaluation of their home contents when they take out insurance but forget to update the value over the years. That’s why statistically one in three homes are underinsured by as much as 30%. Should you need to claim, your household insurance will pay out on a pro-rata basis and you will receive less money than what it costs to replace your goods.

For example, say you’ve insured the contents of your two-bedroom apartment for R200 000. You experience a break-in and now have to claim to the value of R100 000. However, now you discover that the replacement value of all your contents (the value at risk) is R300 000. Your settlement amount will then be calculated as follows: R200 000/R300 000 XR100 000 = R 66 666. That means a shortfall of R33 333.

If you think about it, you constantly amass more stuff as you upgrade technology, have kids or move to a bigger property. Then there are times of the year, like the festive season, when you might buy more items to impress visitors or receive lavish gifts. It’s a good idea to use these milestones or events to relook your household insurance cover and see if you’re still adequately covered.