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How Much Home Insurance Do You Need?

How Much Home Insurance Do You Need in South Africa?

Burning down your house to build a bigger one is not a good idea for lots of reasons. The biggest one being that over-insuring your home will see you lose money. You’ll only get a pay-out for out the value of your property at the time of the catastrophe. That means you will lose the difference between the home’s value and the insurance value.

Similarly, should anything happen to your property and you are underinsured, you’ll only get a pay-out for the amount that you had been insured for. The same is true of household contents insurance. If you only insure, say 50% of your contents, you will only get 50% value on every item, even if you are only claiming for one item. To avoid these mishaps, it’s best to determine how much home insurance and household contents insurance you need.

How to Figure Out How Much Home Insurance You Need

1. Get Your Home Appraised.

Before you take out home insurance, it’s a good idea to get its value appraised by an assessor. Assessors have the qualifications necessary to estimate your home’s value accurately. They can tell you how much it’s worth, including the property on which it’s built. This is, however, not the total extent of your home insurance policy.

2. Add The Cost of Rebuilding.

In the event that the home is completely destroyed and you submit a claim on your home insurance policy for the full value of your home, you will come short. Because there are extra costs involved. Costs like the fee for rubble removal.
It’s smart to include such costs in the extent of your cover. Building costs are different to the cost of purchasing a house. Determine how much it would cost to remove rubble and rebuild to adequately cover your home.

3.Opt for Increasing Premiums.

Your home insurance company might also provide an adjustable home insurance policy. These policies have premiums that increase as well as increasing cover based on inflation. In this way, you can ensure your cost of rebuilding remains covered even after many years of inflation.

4. Calculate the Value of Your Household Contents.

Most insurers cover all your contents under one policy. Specialist items need a specialist insurance policy because of their higher value. How much your get paid out in the event of a claim is commensurate to how much cover you have.

5. Opt for 100% Cover.

If you have insured all your household contents which are valued at R200,000 for only R100,000, you are 50% covered. This means that when you claim for your television set, at R15,000, you will only be paid out R7,500 because you are only 50% covered. Make a list of all your contents and their value. Then give this to the insurer as well, to determine the full amount of cover you require.

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