Home insurance protects the roof over your head; household insurance takes
care of the possessions under that roof. Household insurance is
critically important in the event of a burglary, but you will definitely want to
insure the contents of your house regardless of the risk of theft. Household
insurance deals with items such as electronic equipment (television, computer,
stereo system), furniture, jewellery, appliances, and any other items of worth
that are typically found inside a home.
Household insurance protects the contents of your home against loss
arising from events that are described in your policy document. You need to know
exactly which events are covered, and which events are excluded, prior to any of
those events occurring. The term "contents" can also refer to possessions that
are typically found in a garage, outside storeroom, or on your property (outdoor
grill, patio furniture), and do not exclusively refer to items inside your
When you purchase household insurance you do not individually insure each item
in your house. Instead you place a total value on the contents of the house by
insuring those contents for a bottom line sum. Household insurance then works in
the following way: any items that need to be replaced by the insurer are
executed on the basis of new for old. This means that your insurance provider
pays out based on the cost to replace the insured item at prices today as
opposed to what it originally cost you to buy that item years ago. You need to
be aware of current prices, but this is a big advantage for policyholders.
When it comes to household insurance a lot of policyholders make one of two
mistakes: they either over-insure the total value of their contents, or even
worse they under-insure the value of their goods. Remember that every insurance
company will use an independent assessor to determine the value of the contents
that need to be replaced. If you over-insured those contents you will have paid
premiums for an amount that you will never recover, but if you under-insured
your contents then the potential loss is far greater in the event that you need
to make a claim.
Many homeowners try to cut corners and save small amounts on a monthly basis by
under-insuring their household contents. They pay lower monthly premiums,
because the amount of your premiums directly correlates to the sum total for
which the contents are insured. That is all well and good until the fateful day
when you need to make a claim. It is a prime case of being "penny-wise and
pound-foolish." Don't assume that it can never happen to you, and insure your
household in a responsible manner.
You need to read your household insurance policy document very carefully
beforehand so that you know what the policy excludes as well as what it covers.
Household insurance typically excludes damage caused by public unrest or
political upheaval, as well as damage that stems from livestock, animals, or
domestic pets. Theft that takes place while the house is being let or sub-let to other tenants is also generally
excluded from cover. In fact, losses as a result of theft may not be covered in
every circumstance. There are household insurance policies that do not provide
full theft cover while your belongins are being moved from one domicile to another, and
some other policies also exclude theft from a property that is left unoccupied
for more than sixty days in a row during any one-year period, unless there is
clear evidence that the theft was due to forced entry.
Another standard practice that insurers rely on with household insurance is to
limit their liability for any one item in your home to a maximum, generally of one-third
of the total sum for which the household contents are insured. For example if
the total value is R300,000 and a claim comes in for a lost diamond ring valued
at R200,000 the insurance company will place a ceiling value on that ring of
R100,000 based on the sum total of the other contents.
Finally, you need to be aware of the "All Risks" section of your household
insurance policy. Unless you specify possessions under this section an
assumption will be made that those possessions are only insured while they are
in the house. So, if you lose your laptop computer while on a business trip
overseas you cannot make a claim under household insurance, unless that laptop
was covered in the All Risks section.
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