Home Contents Insurance

Many people either don’t have contents insurance or don’t have enough cover. Make sure you’re not one of them!

According to the Australian Bureau of statistics the average home contents value is $47,000 (03/04). How would you feel if your possessions were destroyed in a fire, or were stolen? Can you afford to replace everything you own? If not then you need contents insurance regardless of whether you own or rent. Remember, if you’re renting, a landlord’s insurance does not cover your property.

Similar to buildings insurance, contents cover, insures you in the event of loss or damage from:

• Fire
• Lightning
• Smoke
• Vandalism and theft (or attempted theft)
• Escape of water and oil (Water damage is covered, but repairs to the faulty tank, pipes or appliance are not)
• Storm
• Flood
• Subsidence
• Falling trees and branches
• Falling aerials and satellite dishes

Most contents insurance providers have a limit on the value of individual items (typically $2,000) and some limit the total amount of valuables you hold. To insurers, ‘valuables’ usually includes furs, musical instruments, sports equipment, jewellery and expensive gadgets, so ensure that you properly declare everything. This doesn’t mean that you’re not insured for these items, you should tell your insurer about them so that they can discuss terms and any additional premium that’s required. It’s likely you’ll need to provide valuations or receipts for all such items.

Accidental damage under Home Contents Insurance

Home contents insurance differs and may or may not cover you for accidental damage for some items. As an optional extra, you may wish to consider a bolt-on to cover yourself in the event of accidental damage. These typically include:

• Accidental damage to mirrors and internal glass
• Accidental damage for things such as dropping a vase or spilling red wine on the carpet
• Accidental damage for business equipment
• Cover for personal possessions that you carry on you out of the home such as your purse/wallet and cash & credit cards
• Caravan cover
• Bicycle cover
• Replacement keys
• Cover for contents lost or damaged when moving home
• Replacing spoiled food and drink from the freezer
• New-for-old cover

Home Contents Insurance Excess

Typically, you pay a $100 excess for most claims, but if you wouldn’t claim for anything worth less than $500, you may as well see if increasing the excess will reduce your premium.

Check your total Sum Insured

The Australian Bureau of Statistics estimates a typical household’s contents are worth around $47,000 (03/04), many policy holders holding contents insurance are actually under-insured.

Many policy holders also feel that I may have contents worth $50,000, but I only need to take out $40,000 of cover to keep down costs. Its important to note that home contents insurers apply a technique called ‘averaging’ when settling claims. Ie if your insurance provider surveys your home after you claim and they discover that your possessions were worth a lot more than you’re insured for they can reduce the payout accordingly.

For example if you have insured yourself for 20% less than the true value and you submit a claim for $10,000 you might find your $10,000 claim is reduced by $2,000 (20%). It therefore makes sense to insure your contents for their full value.

Keep your Contents Insurance up-to-date

It’s amazing how much household items add up, especially new gadgets. Do a quick inventory and you’ll be surprised how much you own. Afterwards, don’t forget to call your insurer and amend your policy, and remember to keep them up-to-date on your possessions. Failure to disclose things might invalidate your insurance, or you may be hit by averaging.

You can usually find a cheaper deal at renewal by looking elsewhere, but this is even more likely when the sum your insuring changes, so shop around and see how much you can save!