At this time of year, people fill their houses with ready-packed Christmas gifts and perhaps prepare to take off for a well-deserved summer break.
These are perfect conditions for would-be burglars. So it’s vitally important that you make sure that you have your contents adequately insured.
What is Contents Insurance?
A type of general insurance, home contents insurance covers the cost of stolen, damaged, or lost household items and personal belongings.
The coverage may include jewellery, power tools, television, computer, furniture, and even clothes.
Australian homeowners usually buy contents insurance as a rider of their home insurance because the cost is lower than buying two separate policies.
Top Tips in Getting Contents Insurance in Australia
Here are a few content insurance tips to make sure you don’t get a rude shock in the unfortunate event that you need to make a claim.
1. Buy contents insurance that can cover the replacement cost of your home items
Most types of contents insurance in AU offers the replacement cost of your belongings.
This is known as ‘new for old’ insurance, which will reimburse you the cost of replacing your things with brand new ones.
This is more expensive but can provide you with the best value.
Some contents policies cover the cost of damaged or lost items, which refers to the value of what your belongings are worth when they are listed for insurance.
For example, if your television was $300 when you signed up for coverage, you can get $300. You need to pay more to replace your TV of the same quality.
Upon claiming, your insurer will pay the replacement for damaged items.
2. Understand what you’re covered for
Make sure you know if you’re covered for loss, any unanticipated event, or just specified events like fire or theft.
Never get your policy signed and prepared without taking into account your needs.
Check to see if you’re covered for your stuff’s (second hand) value or for their new replacement value (obviously a more expensive policy).
If something breaks, check to see if your policy covers its repair.
Make sure you know which portable items (like jewellery, cameras, mobile phones and sporting equipment) are and are not covered for use outside the home.
Consider separate insurance for that precious smartphone.
3. Figure out the cost of your belongings
Figure out the value of your belongings, so you have the benchmark for coverage. This will also help you determine what items you need to be insured.
List down all your valuables and their cost to replace at current prices. Spend an hour walking through your house room by room — list your possessions and take photos. Most people underestimate how much stuff they have.
List precious items like jewellery or that classic DVD collection and check to see if they are covered (and the limit is high enough) or if they need to be listed separately.
Be sure to write down important details such as receipts, serial numbers, warranties, and photos.
In calculating the sum insured, you can use online calculators. Check your current insurer if it has an available online calculator.
Most calculators cover specific costs such as replacement on top of your sum insured so that the results may be different between calculators.
If you are getting the contents insurance with home insurance, you may need to list down two sum insured – one for the contents and one for the home.
4. Compare contents insurance from different providers
Shop around and get quotes from at least three insurers so you can find the best policy that is suitable for your needs.
Ask for Key Facts Sheets, and if you want more details, you can also read each policy’s relevant product disclosure statement (PDS).
Be sure to compare the following features:
- Premium – the cost for the same coverage
- Coverage limits – the cap on how much you may claim for particular items
- Excess – the amount you pay when you make a claim
- Settlement process – available options on how you can claim or how your items are replaced or repaired
- Value of insured items – cost or replacement cost of your insured items
5. Check if you need accidental damage cover
Just like getting car insurance to protect you from road accidents, contents insurance can also protect your belongings due to mishaps in your home.
Some forms of contents insurance don’t offer coverage for accidental damage.
Consider if you need this extra, so your belongings are protected against mishaps like stains or chips.
Also, confirm what is not included in the coverage, such as damage to electronics or types of clothing.
6. Understand insurance exclusions
Home and contents insurance covers damage and loss caused by specific unfortunate events such as vandalism, theft, or fire.
But not everything will be covered in every scenario. So it is ideal for checking the exclusions. For instance, damage caused by owners negligence, flooding, or criminal damage may not qualify.
Also, confirm specific items not included in the coverage and check if you want them to be included in another insurance.
For example, portable items such as laptops, tablets, smartphones, or cameras usually have insurance. The same scenario applies to valuable items such as rare books, jewellery, art collections, or signed memorabilia.
Most contents insurance have cap amounts on how much you can claim for particular items. For instance, home appliances have $1,000 maximum coverage.
If a fire damages your $1500 fridge, then your insurer will only pay a maximum of $1,000, and you need to shoulder the difference to buy a replacement.
7. Look into renter’s insurance
A renter’s insurance is recommended for those who are renting a home or apartment.
This cheaper home contents insurance might cover accidental damages to the property, including legal costs if someone sustained injuries while staying in your home.
But renter’s insurance has more limits and exclusions compared to regular contents insurance.
On the other hand, if you are renting out your home, you may consider getting landlord insurance, which can help you protect your property from the risks of renting it out.
This works like contents insurance to cover insured events that cause loss of rental income, loss, damage or theft to your rental property.
Because rental business is very popular in Australia, landlord insurance is offered by most providers of general insurance, so you can shop around for different policies to compare.
8. Increase your excess
Insurance excess refers to the amount you pay when you make a claim.
Most insurance companies will allow increasing your excess. Look into the advantages and disadvantages between having low excess and high premium versus high excess and low premium.
More often than not, you can save on insurance premiums if you adjust your excess.
9. Take advantage of discounts
Some insurance providers offer lower premiums if you apply online or if you choose to pay annually instead of quarterly.
You may also qualify for lower premiums if your home is installed with smoke alarms, security systems, or fire extinguishers.
Don’t forget to ask about perks such as free lock replacement after a burglary, extra coverage when you move to a new home, or temporary accommodation if your home was damaged by fire.
10. Keep your receipts
Never lose your receipts, especially for valuable belongings such as jewellery, laptops, or appliances.
Use a file, a drawer, or even a cardboard box, but keep those receipts as proof of ownership.
You can also take a picture of those receipts and save them on a hard drive.
Renewing Your Home Contents Insurance
If you are in the process of renewing your home contents insurance policy, be sure to update your plan to accommodate important changes.
For example, add coverage for additional valuables or delete items that are no longer in your possession.
It is also an excellent time to shop around, so you can still ask for quotes from other insurers to ensure that you are getting the best deal.
There are instances that you’ll end up paying higher premiums because you choose to stay with one provider.
If you are in any doubt about what is and isn’t covered, contact your insurer. Don’t leave it until you try to claim to discover that you weren’t as protected as you thought.
Ensure that your home complies with policy wording about maintenance, particularly window locks and deadlocks.
Common Challenges with Home Contents Insurance Claims
Hopefully, you don’t reach a scenario where you need to file a claim.
But just so you know, there could be some problems in claiming for contents insurance.
For example, if you are underinsured, your provider will only pay a percentage of your claim.
Also, if you fail to replace your policy with a new one, your insurer may deny coverage for fair wear and tear to your insured items.
Also, check the fine print because your policy may indicate that your provider will send a replacement instead of paying for the damages.
Worried about the size of your premium?
Don’t be tempted to under-insure yourself by underestimating the value of your home contents. If necessary, reduce your premium by increasing the excess or having an alarm installed instead.
And, of course, always remember to shop around.
Are you planning to be away?
Many policies deny cover if you don’t “maintain your home in good repair and condition” or if you leave your home unoccupied for 60 consecutive days and don’t keep it “in a lived-in state” by:
- keeping the lawns mowed and garden tidy
- stopping regular mail and newspaper deliveries, and
- organising someone to check inside and outside your home at least once a week.