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

Whether dealing with a home or office, calculating the costs of contents insurance is easy right? All you need to do is add up the projected value of your personal belongings and report that number to the insurance broker? Well no, not exactly. Contents insurance is actually much more complicated than that and it’s important you understand the minor details.

First off paint a scenario into your head. It’s not a pleasant scenario but you need to consider these options once in awhile. Your kitchen is destroyed by a rapid flood or devastating fire. Nothing valuable is left behind. Now you must make a claim. But not just a claim, actually two claims. You need a claim for appliances that were built into the room, and another claim for possessions that were added or are movable.

Natural disasters like fires, floods, and wind damage account for a lot of personal damage found at homes. Also theft is a primary cause for damaged or stolen goods. Make sure your policy covers all of the above. Always read the fine print, because no matter how unique of a type of situation, there is always a chance it will not be covered.

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 you want to guarantee is covered is the replacement value. This differs from the current market value in those extremely important valuables such as antiques and jewelry will be at least covered at replacement or emotional value if they are unable to be replaced. Expect higher premiums however if you wish to protect these coveted items.

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.

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.

All in all, an average appraisal of house contents reach around $200,000 a year and the annual insurance costs will average out to about 3% of that value or $6,000 to be more precise.

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