How to Determine Your Household Content Value

The rate of crime in South Africa, has made it a necessity for people to have household insurance. Not only that, it also pushed the cost much higher than in the past, due to the increase in the number and amount of claims.

Insurance can be a minefield if you don’t know your stuff. For example, you have household insurance and believe that you will be fully covered if a burglary takes place at your home; after all you have been paying your premiums like clockwork every single month. But, if you have not insured your possessions at replacement value, you will not receive the full amount required to replace the stolen articles at today’s prices.

The term used is under-insurance—a shortfall between the amount of cover and the current replacement value. Some people may deliberately under-insure their household content to bring down the monthly premiums. Others have never drawn up a proper inventory list, or neglected to keep it updated.

Let’s use some examples to explain the consequence should you be under-insured: You bought furniture ten years ago, paid R10 000 and insured it for that amount. If you have to replace that same furniture today, what will the cost be? Much more than R10 000. Your insurer now calculates your claim at the replacement value, let’s say R15 000. The amount paid to you will be calculated as follows:

Insured for: R10 000
Claim: R15 000
Replacement Value: R15 000
Calculation: R15 000 X R10 000
15 000 = R10 000

You will therefore only be paid out R10 000 and will have to fund the additional R5 000 from your own pocket. We have looked at a total loss in our example but the same rule will apply even if you claim for one article, you will receive a pro-rata payment only.

If you have over insured your household content, on the other hand, let’s say for R20 000, you will not score anything, you will still be paid at the replacement value only, which is R15 000.

The moral of the story is to ensure that you are always insured at the full replacement value of the total value of your household content. So how do you do that? By completing, and regularly updating a full inventory of your household content. You must include the content of every room in your house as well as the outbuildings such as a garage and storeroom where some valuable articles may be kept. Garden furniture can also be added, but claims on this type of item will be subject to certain conditions.

What must be listed on your inventory? Basically everything that is not a part of the fixtures and fittings of the house, in others words everything that you will take with you should you move house. This is a time-consuming project but once you have done a proper job, it’s just a matter of updating new items, removing items you got rid of and reviewing the amounts annually.

Most insurance companies will supply you with an inventory list you can use for drawing up your inventory. You can also find examples of inventory forms on the internet sites of some insurance companies.

List the contents of your house, room by room. Don’t forget the items inside cupboard and drawers, CD collections, jewellery, clothes, everything. Remember your outbuildings too. Then complete replacement values for them, look at furniture and appliance prices in shops, newspapers, on the internet.

For your high value, special items such as jewellery, stamp or painting collections it may be in your best interest to get a written valuation from a qualified valuator. One thing is for sure, you will be shocked at what it will cost you to replace everything at today’s prices and probably find that you were totally under-insured.

When you buy new items, retain the receipts in a safe place with your inventory, such as a bank security box or at your place of work. Keeping copies at different places is also a good idea should one get lost.

Another idea is to take photographs of every room in your house and to keep these as proof with your inventory. This should not replace your inventory as not everything will be visible on a photograph.

Don’t delay drawing up your inventory, a nice job for next weekend?