When it comes time to purchase a property, you may be recommended to buy a home and contents insurance policy rather than just a home insurance policy.
The advantages of home and contents insurance policies include lower premium or cost of the policy and ease of filing insurance claims. However, there may also be some disadvantages, such as lower coverage limits for some of your belongings and the need to buy more optional coverage. You would naturally want sufficient coverage for your home as well as the items you possess, but at an affordable cost. Consider checking the home and contents insurance policy’s inclusions, coverage limits, and exclusions
What is the difference between home and contents insurance?
To understand how a home and contents insurance policy differs from a home insurance policy, you only need to look at what’s on your property and what’s inside your home. Everything that’s outside and permanently fixed or installed may be covered by a home insurance policy, including your swimming pool, the garage, the toolshed, solar panels, and fences. On the other hand, most of the things that are inside the home are covered by a contents insurance policy such as your jewellery, electronics, furniture, kitchen appliances, memorabilia, and so on.
There may be other things that are either on your property or in your home that you often carry with you to the office or elsewhere. These may not be covered by a home or contents insurance policy when away from your property. For example, if your laptop is damaged by a power surge in your home caused by a lightning strike, your contents insurance may cover it. But the policy won’t cover it if it’s stolen or damaged when you’re travelling with it.
What are some benefits of home and contents insurance and some disadvantages?
Home and contents insurance packages the two insurance policies together, which usually makes it cheaper than the two separate policies. Dealing with the insurer, especially after a damaging incident, may also be easier. Some of the benefits of home and contents insurance include:
- You deal with one insurer and pay for one policy rather than two, which brings down the premium or the cost of the insurance policy.
- Your policy may cover any damage to your possessions by disasters that affect your home.
- You face less stress after a disaster as you don’t have to go through the process of filing insurance claims twice.
- You may be covered for any liability in case a visitor to your home is injured and requires treatment or hospitalisation.
In contrast, some of the drawbacks of a home and contents insurance policy are:
- You may need to buy optional additional coverage or exclusive coverage for some high-value items, or risk being underinsured.
- Some insurers may insist that you pay for a safety net cover, which can help prevent being underinsured but can cost you more.
- The coverage limits for some of your belongings may not be adequate, as not all insurers offer compensation based on a “new for old” replacement.
- You could end up paying more out of pocket when you file a compensation claim as insurers may stipulate paying the higher of the two excess for the home insurance and contents insurance policy.
- You’ll need to check the policy documentation more thoroughly to make sure there are no unexpected exclusions.
If you’re unsure that the policy you are buying is the right one, you can compare home and contents insurance policies online before choosing. This can help you understand the difference in cost between a separate home insurance or contents insurance policy and a combined home and contents insurance policy. Consider speaking to the insurance providers after shortlisting a few policies to get more specific information. You can also ask them about the discounts they offer and options for lowering the premium.