Insuring the contents of your home gives you the peace of mind of knowing that you’ll be able to get your valuables replaced if anything gets stolen or is damaged in an accident or a natural disaster such as the recent flooding in Kwa-Zulu Natal. But many consumers wonder just how much insurance is enough to keep them covered.
READ: The impact of natural disasters on homeownership and rental properties
Ernest North, co-founder of Naked, the digital insurance platform, says that Naked’s data shows that most claimants in Kwa-Zulu Natal had purchased enough insurance to pay for the damages to their buildings during the flood. The majority also purchased adequate cover for the contents of their homes.
However, among those who were underinsured, the gap between the cover they had in place and the cost of replacing or repairs was significant. Some faced a shortfall between the insurance payout and the costs of replacing or repairing their stolen or damaged items that totalled up to hundreds of thousands of rand.
North says some policyholders underestimate the actual replacement cost of their everyday items as well as the possibility of a total loss. "It’s all too easy to underinsure your stuff if you don’t take an inventory of what you own and how much it will cost to replace. If you experience a total loss, you could end up seriously out of pocket”.
How do you know if you have enough insurance?
As a simple exercise, North recommends taking a quick look in your wardrobe and adding up how much it would cost you to replace all your clothes. Next, consider the costs of replacing everything in your kitchen, especially if you have high-quality small appliances or good glassware, cutlery and crockery, followed by the other rooms in your house.
READ: Check these vital items off your list and get the best out of your home insurance
Also, many insurance customers forget to adjust their policies when they buy something like an expensive new TV or to relook their policies once a year to ensure they’re keeping up with inflation. It’s easy to lose sight of how expensive some items might be to replace — especially things like furniture and large appliances. R
What happens if you don’t have enough cover and experience a total loss?
“Many people only learn they are underinsured after their house burns down or gets cleaned out in a robbery and they make a claim,” says North. When assessing a claim, an assessor from the insurer will evaluate what it would cost to replace all of your belongings now. If the replacement value of all your belongings is R625,000, but you only insured your things for R500,000, you’ll need to find R125,000 to fully replace your things.
What does “average” mean in the context of home insurance?
If you claim and you’re underinsured, the assessor will apply the principle of 'average' to determine your pay-out. ‘Average’ is when the proportion by which you are underinsured is used to reduce the insurance pay-out on each of your claims. Imagine you insured your contents for R250,000 and they’re worth R500,000. In a burglary, a thief steals your TV and some jewellery worth a combined R100,000. When you claim, you’ll receive only R50,000 (minus your excess) because you are underinsured by 50%.
READ: Vital insurance considerations for property and business owners
How do you determine how much insurance you need?
The important thing is to insure your items for what it would cost to buy them new today. Also, if you are insuring all the things in your home, make sure you include everything – even your clothes, cutlery, and book collection. We suggest going through your home room by room, closet by closet, to check what you own and would want to replace if it’s stolen or damaged. Don’t forget about your garage, storage rooms or wendy house!
You can use an inventory app or even a spreadsheet to track the replacement value of each item. If you’re not sure, go online to check recent pricing. If your model or item is no longer manufactured, you should look at the price of the items that are closest to yours. And, notify your insurer if you want to insure an item for less than what it would cost to replace it.
READ: Building vs Home contents | Know exactly what your insurance covers
Regularly review all the things you own to see what has been upgraded or added. Some insurance customers add a buffer of R50,000 to R100,000 on top of the value of the total contents that they calculate to account for small purchases they make throughout the year. This means you don’t need to update your policy every time you buy something new. But, also do remember to review your possessions every year or two to check if your policy is keeping up with inflation.
It's easy to get the right amount of cover
Digital insurance platforms like Naked make it easy to insure your home contents accurately. Not doing it right might leave you high and dry if you need to claim, while getting it right will help you to rebound when you need to claim after an incident like flooding, a robbery or an accident in the home.
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