How to insure your household contents
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| How to insure your household contents |
| By Neesa Moodley of Personal Finance | www.persfin.co.za Once you have your home, or building, insurance in order, the next thing you should look at is your household insurance. This is the insurance that covers you for theft or damage to your household contents and possessions. When you move into your first home, one of the first things you should do is take out insurance to cover your household contents. While homeowner's cover is insurance that covers the actual bricks and mortar of your home against damages, household contents insurance covers you for damages to, and loss and theft of your personal possessions and general items in your home, such as your furniture and appliances. Some examples of the things you can be covered for include the accidental breakage of your television set and mirrors, and the theft of your guest's belongings. Householder's insurance may include public liability, which means that if anyone is injured while on your property and he or she claims damages against you, you can make a claim against your insurance policy to cover this. You can also include liability to domestic employees so that you have insurance if anything should happen to your domestic employee while on your property. If you make a claim on your insurance policy, you will be required to pay an excess amount. This is the portion of the claim you will have to pay, and your insurer will only pay out the balance of the assessed loss that is covered. You may be able to increase the excess amount on your policy in order to reduce your monthly premiums. However, you should consider what the saving will be and whether you have the necessary funds to meet a higher excess payment. Replacement values Ideally, your insurer will pay you replacement values for your possessions in the event of burglary or damage. This means that even if you bought a video camera five years ago, your insurer should be able to pay you the same amount it would cost you to buy the camera today. However, the onus is on you to ensure that you are covered for the replacement value of your possessions. This means updating the insured values of your possessions at least once a year. After you have taken out insurance for your household contents, you need to maintain your policy by ensuring that the replacement values you have chosen for your possessions are always up to date. Because the cost of goods usually increases with inflation - which recently rose above 10 percent year on year - it is unlikely that you will be able to replace any stolen or damaged items at the same cost as you would have three or four years ago. It is your responsibility to ensure that your replacement values are up to date. If you fail to do so, you take personal responsibility for covering the shortfall out of your own pocket. For example, your insurance policy might provide you with R100 000 in cover for your household contents, but you might find that the cost of replacing those contents has risen to R200 000. In the event of a claim, your insurer is obliged to make only pro rata restitution - which, in this case, means only half your claim will be paid out. Being underinsured Danny Joffe, Hollard's legal claims adviser, says you can end up being underinsured when you acquire new assets that you forget to include under your household contents insurance or under the specified all-risks section on your insurance policy. He says one way to get around this problem is to keep a comprehensive inventory of your household contents and update your list of possessions, as well as their replacement values, at least once a year. Possessions that are most likely to be underinsured include your jewellery, art, antiques and collectibles. For example, the price of jewellery has more than doubled in the past four years as a result of the dramatic rise in the price of gold and platinum. Joffe says Hollard's claims department frequently deals with jewellery claims, and scores of clients are disappointed when they realise they are underinsured. "Art, antiques and collectibles have also seen sharp increases recently, so you should have experts regularly evaluate your assets in these categories," he says. You should contact your insurer or insurance broker for a list of professional valuators. The valuators will charge a fee for their services. Last week (see "How to … insure your home"), we reported that the advantage of paying a fee to a professional valuator is that he or she will have professional indemnity insurance cover. If his or her assessment is not accurate, you will have recourse to compensation through the valuator's cover. This is definitely preferable to your attempting an "educated guess" at the value of your household contents. Rowan Lyle, the director of Hollard's broker division, says it is also possible to negotiate with your broker and arrange for your insurer to pick up the valuation tab. As an example of costs, Asset Survey and Risks Specialists charges you R350 plus VAT for a valuation of household contents worth up to R350 000 and R450 plus VAT if your household contents are valued between R350 000 and R700 000. You could obtain a valuation certificate from reputable jewellers for your jewellery. In some cases, the jeweller who sold you the jewellery will update the valuation certificate for free. Other jewellers will charge you a small fee of up to R200 to value jewellery not bought at their store. Security measures The security you have installed at your home will also make a difference to your risk profile and, accordingly, to your insurance premium. This includes things such as your alarm system, electronic gates, electric fencing and a contract with an armed-response company. If you had any of these security features when you first took out your insurance policy but later decided to change them (such as cancelling the contract with an armed-response company), you should immediately inform your insurer of the changes. Similarly, if you have added any security features, it is in your best interests to inform your insurer so that it will update your risk profile. Caroline da Silva, the head of portfolio management at Santam, says you should ensure your alarm system and its back-up battery are in working order, so that should the system fail to respond to an intruder during a power failure, you will still be covered for losses incurred. She says the general rule of whether you will be covered as a result of power failures is whether the interruption was caused by damage as a result of a specific peril named in the policy, such as fire, lightning or impact. If the power failure was the result of load shedding, you will be able to make an insurance claim on the losses incurred. Getting insured You can either take out a householder's insurance policy through an insurance broker, who can deal with insurers on your behalf and select the best deal, or you can arrange your own insurance. Using a broker means your monthly insurance premium will include a commission fee. However, the broker can negotiate a good deal with the insurer, and give you advice about your policy and what you need to do to comply with the policy. The broker may also ensure that your policy is in place and help you to claim from your insurer. There are several insurers in the market today, however, who are happy to deal directly with you. You can phone them or you can access their websites for a preliminary quote, and an insurance consultant from the company will later contact you to conclude the process. If you choose to deal directly with an insurer, a telephone consultant will ask you a series of questions to determine your risk profile and the level of cover you require before your insurance premium is decided. If you use an insurance broker, the broker is responsible for asking you these questions and noting your answers. You have to be honest in your answers and should not omit information that could be relevant to your insurer - whether you are dealing directly with the insurer or using a broker. If you buy your insurance policies directly from an insurer through a call centre, remember that your calls will be recorded, so don't think you can lie to the consultant and get away with it. For example, your insurer could ask you whether your home will be occupied during business hours. If there is someone at home 24 hours, it means there is less risk and you will pay a lower premium. However, if you later make a claim and it turns out that your home was unoccupied during the day, your insurer has the right to turn down your claim. Checklist for when you insure your goods Some of the measures you can take to ensure that your household insurance is up to date and that you have taken the necessary precautions include: Making an inventory of all your home contents, noting serial and model numbers. Keep the values current once you have compiled the inventory by researching the current replacement value of your goods. You have to find out what it would cost today to replace your possessions. If you bought a television set 15 years ago, the insured value should be the amount it would cost you to buy a similar set today and not the price you paid 15 years ago. Adding new items to the inventory and including their value based on the invoice. Revaluing your expensive jewellery at least every two to three years, depending on inflation and the price of precious metals. Taking photographs of all your jewellery, art, antiques and special items and keeping the photographs with your policy documents. Ensuring that you get fire extinguishers to limit possible losses caused by fires. Checking that your policy is paid. If your banking details change, inform your insurer immediately so that you do not end up with a lapsed policy. If there is no payment the policy might be cancelled, leaving you with no insurance cover. In addition, remember that: If an alarm is a requirement on your policy, check that it is in working order and activate it every time you leave the premises. Make sure that the response company does get the signal when the alarm goes off. Check the battery of your alarm system and stand-by items, such as your electronic garage doors. When applying for a policy, tell the insurance company or broker about anything that might influence the premium or cover. If your insurance cover is subject to burglar proofing and security gates, it applies to each and every window and door. An insurance policy does not cover all contingencies. For example, you may not have insurance for liability to domestic employees if you have not specified that you require this insurance. Make sure that you know what is and what is not covered under your policy. Most importantly, you are entering into a legal contract. Make sure you read and understand the terms and conditions and don't misrepresent your position. All-risks insurance There is also usually an "all-risks" section within your household contents insurance policy that provides cover for your clothing and personal effects when you leave your home. Personal effects could include a briefcase, handbag, umbrella, hearing aid or your spectacles. Usually there is a limit on the cover for these items and a limit per item. If you have items that are more valuable than these limits, you need to specify them. For, example, if you have a valuable camera and accessories, or valuable jewellery. Check your policy carefully to see what cover it provides for items such as laptops and cellphones, and whether the all-risks cover is worldwide or limited to certain parts of the world. If you have specified an item under this category, you will probably be required to provide a a valuation certificate or a copy of the sales invoice showing the price you paid for the item. All-risks cover can be particularly useful since you are unlikely to restrict the use of your jewellery, cameras or cellphones to your home. |
