Counting your contents before they’re snatched

Imagine a break-in where your prized possessions are taken from your home, or your geyser bursts and destroys your carpet and an entire storage wardrobe of clothes and keepsakes. Now imagine paying to replace those items or fix any damages from your current income. Could you do it without going into massive amounts of debt, or depleting your savings? Probably not, but fortunately short-term insurance provides protection, so that you can have a financial safety net in place.

Unfortunately, those who are insured often turn out to be underinsured. In this case, imagine how many people (who aren’t insured at all) are at deep financial risk as you read this? You don’t need to be among them.

Focusing solely on motor cover or making sure your new cell phone is covered doesn’t mean your insurance is up to date. Neglecting house contents and building values are common underinsurance traps, but again, don’t need to be.

Home is where the start is

Start with doing an inventory of your contents at home. List everything in each room; where there are cabinets, list shelves and items inside boxes, go through drawers, and don’t forget the garage. There are templates you can download online – or you can ask your adviser or insurer for any templates they might have. Whichever way you choose to prepare the list, be as thorough as possible, noting purchasing costs or estimates per item, if you were to replace the items with new ones.

It still counts

When you purchase something, you insure it at its purchase price at the time. As time passes, the value of an item decreases and you may think reducing cover makes sense, not realising you need to keep replacement cost in line with current costs. Consider the items you have had for years – when last did you think about their cost today?

Items you might not have thought about include pots, pans, clothing accessories and linen. Focusing only on TVs, sound equipment or furniture won’t cut it. Thinking you can self-insure some of the “cheaper” items isn’t advisable either, as an insurer will consider all your contents, and then pay you out proportionately. As an example, if your contents are really worth R1 million, but you’ve only insured them for R500 000, any claim would only qualify for a 50% pay out. The same goes for the value of the actual structure of your home.

A realistic review

Simply having insurance isn’t enough: you need to have enough cover in line with what you own. You can consult a professional to value your goods (from contents to the building itself) if you are unsure, and its highly recommended. Some insurers provide a valuation tool where you can enter all the items and it will calculate the current replacement cost at that specific time for you. Getting a property valuation done is easy to arrange as well.

Hatch a plan for any improvements too

While going through your belongings, you might be struck with inspiration to renovate, or recall that some crucial updates are currently missing in your policy.

Neglecting to incorporate these into your insurance simply means there will be no cover for them. This could be a huge financial loss if the property needs to be rebuilt. If you add any green measures as well, such as a solar geyser, you need to let your insurer know to get proper cover put in place.

Even if you have done nothing new to your home, in order to replace it if a worst-case scenario arose, the rebuilding costs will also be considerably more than when you first bought the home. Be realistic about everything inside your house, as well as the house itself to get the right cover.

Match rising costs with your cover

The rising inflation rate means there’s an increasing gap between the market value for which you insure your home and goods, and their real replacement values. Your policy may take a 10% inflation increase into account, but what happens when this figure rises to 15% or 20% because it costs so much more to replace something in current value? If you bought a couch ten years ago, will it only cost 10% more today? Probably not. Considering the rising costs of property makes this question even scarier.

Not updating cover properly means that any claim will result in a much lower pay out than you’d expect. Conducting at least an annual review is best practice. Working with an adviser can make things simpler too as they will remind you to check your policy, can provide recommendations, communicating any changes needed to your insurer, and can negotiate the best price for what you need.

[ Article by Bertus Visser, Chief Executive of Distribution at PSG Insure]