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  • Aug 23, 2014
  • Updated: 5:28pm
Ask Melanie
PUBLISHED : Monday, 03 December, 2012, 12:00am
UPDATED : Monday, 03 December, 2012, 4:26am

Ask Melanie: Home contents insurance

Melanie Nutbeam, a certified financial planner based in Hong Kong, addresses common personal finance queries. Send your questions to melanie.nutbeam@hfs.com.hk

Is it really worth insuring my home contents?

If you cannot afford to repair or replace something when it is stolen or damaged, and you prefer not to live without replaceable items, it's worth having home contents insurance. Benefits received as the result of a successful claim will help stem loss.

Make sure your cover remains current - mine lapsed and wasn't noticed until moving apartments earlier this year. Stern self-rebuke was followed by not particularly swift action, but I eventually arranged new cover.

While on the surface the policy looked good relative to my possessions and lifestyle, and the premium was reasonable, a recent burglary and the loss of much-loved and long-collected watches and jewellery exposed my cover.

Here's the low-down on home contents insurance.

Local policies typically cover damage or loss to items from fire, typhoon, gas explosion, flood, theft and accident. There are dollar limits per item. Cash, jewellery, collectibles, electronic equipment and furniture have varying item caps. Matching these against your possessions is straightforward. If the caps don't match your valuables, consider specific item cover. There are also dollar caps per event. Predicting total loss from a single event is difficult. Actuaries use floor area as a guide to total home contents and base the event cap on that. A room-by-room inventory of all possessions and their value will indicate whether your tastes match the average. You may need to review and upgrade your cover as new acquisitions are made.

Most policies also provide worldwide cover for loss or damage to personal effects when travelling and include worldwide personal legal liability cover. Policies vary as to other inclusions such as providing temporary accommodation and storage, repairing damage from forced entry, and replacing locks. Policy exclusions also vary. You may find yourself having to wait to get cover for new acquisitions and there is usually no coverage at all if your home is unoccupied for more than 30 days.

Premiums are based on floor area, levels of cover, range of inclusions and the history of claims. The quality of a policy and its cost vary widely. Discounts can be negotiated for exclusions, beefed up security and if no claims are made.

Having a policy in place may provide peace of mind, but its actual worth will only be known if a setback strikes and a claim is successful. To support a claim, the insurance company will want original invoices, replacement quotations, police reports and, possibly, warranties, gift boxes and photos of the item(s). Make sure you keep these, and keep them somewhere safe. A loss adjustor may be appointed to visit your home, check documentation, make further inquiries, check security and view damage.

In meeting a claim the insurance company has discretion to pay cash, replace, or reinstate items. Each item will have an amount deducted as your contribution to the loss (the excess) as stipulated in the policy.

As future premiums and cover reflect the claims you make, consider preventative measures against burglary. Being surrounded by security services can be deceiving. The Hong Kong police publish "How to Secure Your Home" which gives useful advice tailored to Hong Kong living. Remember, too, that loss of possessions is one thing but physical injury from intruders is another.

A successful claim under your home contents policy will not bring back unique items, or those of sentimental value, nor will it salve the loss of enjoyment of your home; but losses will be mitigated and you may feel less bereft.

The views presented are of a general nature. For specific advice, talk to a professional planner. See the column archive at scmp.com/askmelanie

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