Marius Kemp | House contents Vs building insurance: why you should care

The contents of your home is more than just stuff. It takes a lifetime to build up a collection of prized possessions and only an instant for these to be damaged or taken in a flood or burglary. Replacing them should something happen is likely more expensive than you may think, so it's important to ensure that you have enough financial support to repair or replace them in case they get lost, damaged or stolen.

What exactly is home contents insurance? And how is it different to building insurance?

People sometimes confuse household insurance (or home contents insurance) and building insurance (also called homeowner's insurance). A simple example to understand how they differ is to think of the difference between the owner of a rental property and the tenant. A tenant owns all the furniture inside the house, whereas the owner (landlord) owns the actual building structure and everything around it.

The home contents should therefore be insured by the tenant and the actual structure by the landlord. Thus, everything inside a house is known as its contents, and everything that is fixed – from a garage and pool pump to walls, fence and geyser – falls under building insurance. If you were to turn your house upside down, everything that falls out should be covered by home contents insurance.

Remember: Building insurance doesn't include home contents insurance in South Africa. So, if you are renting, always get your own home contents insurance. If you are a 'rentrepreneur', you will also need household insurance, and additional cover against accidental damages and liability.

What does home contents insurance cover?

Home contents insurance covers everything in your house against theft, fire, malicious or weather damages (storms, flooding, lightning). If you would like these items to be covered for accidental damage as well – e.g. if you spill coffee on your expensive sound system – then additional optional cover can be taken out.

The personal items you carry with you such as your handbag, basic jewellery, clothing, sporting equipment, etc are typically covered under 'all-risks'. However, when it comes to items such as tablets, cell phones, laptops, bicycles, etc. you need to specify the items in your policy. Specifying items means that each item will be listed with its model or serial number plus its value.

Stay up to date with home contents insurance valuations

Many people only do an evaluation of their home contents when they take out insurance but forget to update the value over the years. That's why statistically one in three homes are underinsured by as much as 30%. Should you need to claim, your household insurance will pay out on a pro-rata basis, and you will receive less money than what it costs to replace your goods.

For example, say you've insured the contents of your two-bedroom apartment for R200 000. You experience a break-in and now must claim to the value of R100 000. However, now you discover that the replacement value of all your contents (the value at risk) is R300 000. Your settlement amount will then be calculated as follows:  R200 000/R300 000 XR100 000 = R 66 666. That means a shortfall of R33 333.

If you think about it, you constantly amass more stuff as you upgrade technology, have kids or move to a bigger property. It's a good idea to use these milestones or events to relook your household insurance cover and see if you're still adequately covered.

Keep receipts of everything of value that you buy and take photos of items and rooms for your own records.

The same applies for building insurance. If you make additions to the structure of your home – you should increase the value of your property accordingly. A good example of this is the surge in solar installations over the last few years – which impacts building cover. Solar panels are a fixed structure and thus considered as part of your building insurance.

*Marius Kemp is Head: Personal Lines at Santam Insurance.