Your valuables may be irreplaceable, but you can at least recover their financial value if your home and contents insurance includes adequate coverage.
For any Australian homeowner, what’s inside the home is often as valuable as the home itself. The contents of your home have sentimental value as well, whether it’s family heirlooms preserved across generations or your own set of collectibles and memorabilia. Losing such objects or seeing them damaged can be heartbreaking, especially as they may not be easy to replace.
If you know or can estimate the cost of your valuables, a home and contents insurance policy can at least compensate you financially, though not emotionally. You’ll need to make a list of the possessions that the home and contents insurance policy should cover, and up to what limit.
Once you get an estimate of the cost of rebuilding your house entirely and replacing all your belongings, you’ll know how much insurance you need. If you need help understanding what is and isn’t included, consider reading the insurer’s Product Disclosure Statement (PDS).
Here are five of the commonly misunderstood aspects of home and contents insurance:
You don’t always live inside your house, and neither do your belongings
You need to remember that a home and contents insurance policy only covers the objects physically located on your property or inside your house. You may not be able to file an insurance claim, for example, if you lose your jewellery or other valuable possessions while on a trip or otherwise outside your home.
To ensure coverage during such instances, consider purchasing an additional personal effects policy. A home and contents insurance policy may not cost as much as buying insurance separately for your home and your belongings separately. However, you’ll need to ensure that the policy actually covers all your belongings.
Your insurer may not think your belongings are as valuable as you do
Even if you buy a home and contents insurance policy based on a thorough estimate of the cost of replacing your belongings, you may still end up effectively underinsured if your home’s contents include valuable items that exceed your insurer’s maximum coverage limits. For example, your insurer may cover up to $1000 per item for electrical appliances, but if your $2000 television is stolen, you’d have to pay the difference yourself.
Also, even if your insurance covers the present value of your home’s contents, this may not be enough to replace everything if prices rise in the future. You could choose a higher ‘sum insured’ limit to get extra coverage, or choose an insurer that offers ‘new for old’ replacements, though this could make your insurance more expensive.
Your valuables may be affected by incidents not covered by your insurance policy
When insurers talk about loss or damage, they’re usually referring to theft and accidents If you misplace an item, or lend it to someone who loses it, it is unlikely you’ll be covered by your insurance.
Your belongings may also be damaged from incidents that your insurance policy may not cover items like a water leak due to poor maintenance of your home’s plumbing. You should ideally discuss such exclusions with your insurer before buying your insurance policy.
You won’t have a fixed number of valuables and will likely acquire new items
As you acquire new experiences in life, you may also collect new memorabilia of these experiences. After owning your home for a few years, you will likely buy a few more valuables, which need to be insured.
It may be helpful to keep an up to date list of your home’s contents that you can reassess when updating your insurance. This will help you gauge if you need to upgrade your home and contents insurance policy or purchase additional coverage for some of the high-value items.
The average cost of a home and contents insurance policy can differ from city to city
You’ve successfully listed and evaluated all the contents of your home, you’ve checked the coverage options, and you feel ready to buy your home and contents insurance policy. But when you compare the rates quoted by different insurers, you may find surprising differences when you enter your postcode.
Insurance costs can vary depending on your location. For example, if you live in an area with a higher crime rate, or at a higher risk of natural disasters, insurers may charge higher insurance premiums or require you to buy additional coverage for specific events.