Like all insurance policies, a household insurance is a contract between the insurance company and the policy holder, whereby the policy holder agrees to pay to the insurance company a set and determined premium in exchange for protection against damage and or loss to his or her household contents. And like other policies, there are limitations and restrictions in the terms of cover. Look at your household insurance policy for such and or consult and agent for further clarification.

The most obvious of the limitations is that the insurance company will only pay out the items for the amount it had been insured for. Further the insurance company will only pay out if the item was in fact insured. It is therefore important to provide the insurance company with an inventory of the items that make up the household contents. And to regularly update the list. You do not want to be in a position to have to replace an item because the item was not included in that list or covered.

In respect of the value that the insurance company will place on a particular item before pay-out, it is important to note the difference between a replacement value and a market value. This is best illustrated by an example. At the time that you subscribe to a household insurance policy, you are in possession of a television set that was four years old. You list the television set as being part of the items. It gets stolen when your home is broken into. The replacement cost of the item is now way higher than the actual cost of the item at the time of purchase the market value of the television set would be far lower than the original price taking into account depreciation and use of the item.

The replacement value of the item would be the current value of the item at retail price. So if the insured item was insured at market value rather that replacement value you would be paid out the market value of the item. Then you would need to add an additional amount and buy a new item. Whereas if your household insurance policy had stipulated that the items are covered for the replacement value, then the items retail value will be paid to you. So please check and make sure of the type of cover you have or shall receive. Opt for the replacement value.

Another important restriction to consider is the maximum limited cover a household insurance policy would have on certain items. For example a policy may state that there shall be only a certain amount payable for loss of jewellery. The main criteria for this limitation is to encourage the policy holder to take extra precautions for the more valuable items and keep them preferably in a place of safety, like a bank vault. After all, an insurance company is a business and has to limit its risk intake.

These are just some of the limitations. Check with your agent for any further. There will be.

Cutting down on premium costs is what we all want. Tie up your household insurance with your motor vehicle insurance. The discount you would receive will be well worth the effort.

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