Household Insurance and what it covers in a Nutshell
Household Contents Insurance covers everything that would fall out if you turned your house upside down. That means your furniture, electronics, clothes, cutlery, crockery, kids’ toys, so essentially, all the loose items inside your house.
Your household contents can be insured against theft, fire, and water damage. Depending on your insurer, you can choose a range of supplementary coverage that offers even better protection for items that are specifically special to you, and covers them against, for example, power surges or accidental breakage. House Content insurance is not a legal requirement (like vehicle insurance), but it’s highly recommended.
The most important aspect of Household Contents insurance is the sum insured. That is the maximum amount that can be paid out on a claim, for example if your home and everything in it is destroyed in a fire.
The sum insured is based on the total replacement value of your household contents. If it is too high you’re over-insured, that won’t make any difference if you have to make a claim, but the premium you will be paying will be unnecessarily high and wasteful, seeing as you’re paying for something you won’t be getting. Being underinsured is not a good idea: if your sum insured is too low, your household contents aren’t fully protected, and that can have negative implications when you want to claim.
Let’s assume your household contents are worth N$200 000, but you only insure them for N$100 000. This means you are underinsured by 50%.
In the event that your home is flooded, causing a partial loss of N$50 000, this underinsurance means your insurer will only pay out 50% of the loss, so you will receive a payout of N$25 000.
In theory you should go through your home and make an inventory of everything you own and an approximate replacement cost. You can either go through it with your broker or do an online calculation to suggest an amount based on a few details like the number of rooms, occupants, etc.
Remember: you should review your sum insured every year upon renewal, and adjust it if necessary. It is very likely that over the years you’ll buy new items and more expensive items so the value of your household contents will increase.