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What is home and contents insurance?

What is home and contents insurance?

Owning a home comes with multiple new responsibilities, including protecting the property from damage as well as the contents. You can purchase home and contents insurance separately. Still, it may be smarter, both practically and financially, to buy a combined home and contents insurance policy.

You should remember that purchasing coverage for your possessions or contents requires you to consider different aspects than you would usually. For instance, you’ll need to consider the kind of care needed for some of the items you own and how this would impact if they’re damaged.

For this reason, your task isn’t simply finding the cheapest home and contents insurance policy but also considering how this cover will protect you.

What’s included in home and contents insurance?

The average home and contents insurance policy offered by Australian insurers gives you a choice between covering your home for the total replacement cost or a predetermined sum. The former is what it will cost to renovate or rebuild your home if damaged by a covered incident, while the latter is an estimate of this cost that you agree to with your insurer when buying the policy. These policies will also cover the theft of or damage to any of your belongings kept inside the house. This includes belongings such as jewellery, electrical appliances, furniture, and heirlooms.

The incidents often covered by most home and contents insurance policies are natural disasters like bushfires, lightning and hail storms, and earthquakes. If a storm causes a tree to fall on your property, the damage from that may also be covered. If you live in a flood-prone area, some insurers may ask you to buy optional flood damage cover. This may be the same if you live in an area prone to bushfires, so make sure to check the terms of the policy.

Damage from events triggered by humans such as theft, vandalism, and rioting is also usually covered. You should check if the policy covers accidental damage to your valuables, such as from somebody bumping against them, or if you need to buy additional coverage.

When do I need home and contents insurance?

Getting home and contents insurance is a personal choice, but you may be required to get at least home insurance during the home loan application process. If this is the case, it may make sense to also include contents insurance even if you don’t have any belongings in the property yet.

Outside of the need for insurance when purchasing a home, the decision comes down to your personal choice. All of us tend to be careful about preventing damage to our home or valuables, but some degree of risk always exists. The choice may simply boil down to unexpectedly facing an astronomical bill for damage caused by a disaster. It could also be that buying a suitable home and contents insurance policy will free you of anxiety regarding possible damage. Again, you may need to buy home and contents insurance if you’ve taken out a home loan, or if you have several high-value items inside the home.

You also need to make sure that you get a home and contents insurance policy that offers the necessary coverage. For instance, buying an insured sum policy may be cheaper, but the sum may not cover the full cost of rebuilding your home. Similarly, your policy may cover jewellery, but only up to, say, a couple of thousand dollars which may not even come close to the cost of your jewellery. There may be the option to buy additional or exclusive coverage for some items in such cases.

There are also situations and items that even the best home and contents insurance policy may not cover. Suppose you have a high-end laptop that you carry to work every day. You may need to buy personal effects cover, on top of your home and contents policy, since the laptop travels with you. There are also things like damage caused by wear and tear or by termite infestation that may not be covered as they’re considered to be caused by poor maintenance.

How much can home and contents insurance cost me?

Depending on where you live in Australia, your home and contents insurance policy can cost you upwards of $2,000 every year. However, on average home and contents insurance costs about $1,500 per year. Sadly, with the number of natural disasters increasing every year, the cost of insurance may go up even further.

You do have options, however, to help control how much you pay for home and contents insurance. The most direct option may be agreeing to a higher excess, which is the out-of-pocket expense you agree to pay when filing a claim with your insurer.

If you aren’t sure you’ll have the savings to manage a high excess, there are other ways to minimise it. You can reduce your premium by limiting the number of optional extras you choose to be covered for under your policy. You should also check whether the insurer will possibly offset your compensation claims before opting out of particular cover. to

Do this to ensure that you don’t underinsure some of your expensive belongings. You can also get the best price on your policy by comparing home and contents insurance quotes online. Comparing policies will help find a suitable policy at a more affordable price and if any insurance provider is offering special or discounted rates.

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Fact Checked -

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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Learn more about home insurance

Do I need home insurance for a home loan?

While home insurance isn’t necessarily a requirement for a home purchase per se, it’s likely that if you’re purchasing a home with the help of a home loan, you’ll need to take out home insurance on the property. Home insurance can be one of the factors required in the pre-settlement documentation for a home purchase, and you may be advised by either the bank or a broker (or both) ahead of settlement.  

Can you transfer home insurance?

When you sell your home, you cannot transfer the home insurance policy to the new owner. The buyers need to purchase a new home insurance policy where the insurer will calculate the premium based on several factors.

The risk of any damage to the home is transferred to the new owners when you sell the property. You can speak to an experienced conveyancer or solicitor to find out more about when the risk gets passed to the buyers in your state or territory.

If you move to a new home

Can you transfer home insurance to a new property if you move to a new home?

Some insurers may allow you to transfer your policy to a new property as long as you meet certain conditions. These include informing the insurance company as soon as you enter into a contract to buy the new home. You may need to pay an additional premium when transferring your existing home insurance policy to the new property.

Type of home insurance do I need?

There are two types of house insurance policies, namely total replacement cover and sum insured cover. The former covers the total cost of rebuilding the house to the same standard before it was damaged. The latter home insurance type covers the cost of damages up to a predetermined limit, which is called the sum insured.

Different types of homeowners’ insurance may offer extra cover at an additional premium, including accidental damage, fire insurance, storm insurance, flood insurance, motor burnout insurance, home and contents insurance, and contents insurance. These extras are not classified as homeowners’ insurance types; include one or more based on your situation. 

What is home insurance?

For homeowners, home insurance can provide some financial protection to your property when things don’t go as planned. If you have home insurance and your property is damaged (or even the permanent fixtures inside), you could make a claim to your insurer to cover the costs of getting it fixed, replaced or rebuilt.

The idea behind property insurance is that you pay insurance providers to take on the risk of loss or damage to your property that you would otherwise be carrying. 

How to cancel your ANZ home insurance

You can cancel your ANZ home insurance policy at any time by making a request in writing. The cover is discontinued once the insurer receives your cancellation request.

If you cancel the policy before the premium due date, the insurer will retain the amount for the duration in which it was in force. A proportionate amount of the premium is refunded for the period between the receipt of the cancellation request and the next due date.

You can also cancel ANZ home insurance during the cooling-off period, which is 21 days from the start of the policy. To cancel the policy, you should send a written request along with the schedule to the nearest branch before the end of the cooling-off period. However, if you have filed a claim during the period, the insurer is unlikely to refund the premium amount.

Do I need home insurance?

While homeowners' insurance is not legally required, it’s an option for those who want financial protection for their property. Some mortgage lenders may even require borrowers to take out home insurance.

How much is home insurance?

How much your home insurance could cost and the amount of premiums you pay will depend on many factors, including the amount you need to cover, the excess you're willing to pay, and what type of cover you want to take. 

It's important not to base your insurance policy decision solely on the premiums being charged, reviewing what the policy covers, its features, claim exclusions, and caps when deciding which home insurance policy is the right one for you.

What is a home insurance premium?

Your home insurance premium is what you pay your insurance provider for covering your home under their home insurance policy. It is calculated based on the type of coverage you choose for your home as well as any additional coverage you buy for either your possessions or specific incidents. Your premium can either be paid annually or in smaller instalments. 

Your home insurance policy may cover the total replacement cost, which is the actual expense of rebuilding your home from scratch. Alternatively, it can cover an insured sum, which is a predetermined estimate of what it might cost to rebuild your home. You’re more likely to pay a higher premium for total replacement cover than for insured sum coverage.

Apart from selecting your coverage, you’ll have to figure out your excess, which is the amount you pay out of your own pocket for each insurance claim. If you are okay with paying a higher excess, your insurance premium may be lower. Conversely, if you choose a lower excess, you may pay a higher premium. 

Your insurance premium can also be higher if you live in an area prone to incidents like floods, bushfires, or theft, as insurers are more likely to receive a higher number of claims in such neighbourhoods. 

If you also want to buy insurance for your belongings, a combined home and contents insurance policy may have a lower premium than paying premiums on separate policies for your home and your belongings. 

Does home insurance cover tenant damage?

If you have a property that you rent out to tenants, you may ask, does home insurance cover tenant damage? Generally, as a landlord, you’ll require a different type of insurance policy than a regular home and contents insurance that offers coverage for the unique situations faced by landlords.

Landlord insurance

As a landlord, you must insure against additional risks to protect your investment. A landlord home and contents insurance policy covers loss due to natural disasters, storm, and fire. Generally, it also covers fixtures like stovetops, light fittings, window coverings, carpets, and ovens.

Additionally, you may protect yourself against any loss arising due to damage to your property caused by your tenants or their guests. Some landlord insurance policies may also protect you against financial loss due to unpaid rent.

Does homeowners insurance cover tenant damage? In most cases, regular homeowners’ insurance policy will not cover such damage. It’s always best to refer to the product disclosure statement (PDS) to clearly understand what is included and excluded from your home insurance policy.

Is my home insurance covered for weather damage?

It is important to understand what is covered and what isn't covered in your home insurance policy before purchasing it. One crucial point to consider at the time of evaluating home insurance policies is whether it includes home insurance weather damage cover, and what it actually means if it does.

Typically, the protection afforded by home insurance actually depends on how the home was damaged or affected by conditions. The whole idea behind home insurance is to protect you from loss or damage against an unexpected, sudden event, like a fire or storm. If your home was in the way of a storm and your roof was damaged, which also caused internal water destruction, you may be covered for the damage to the roof and the property. The same holds true for walls or a fence that got damaged in a storm or flood.

However, you may not be covered if the damage occurred because your property was not well maintained and your home suffered a leak. A poorly maintained fence is less likely to be covered by home insurance.

Does homeowner’s insurance cover electrical problems?

Every home has a range of electrical fittings,appliances and wiring running through the structure of the house. You can face many kinds of electrical problems but, unfortunately, your home insurance policy may not cover all of them. Damage accidentally caused by natural accidents may be covered, as might the repair of motors if you have opted for fusion damage cover. For example, if there’s a lightning storm and your home suffers a power surge which causes a short circuit, any repairs needed may be covered if your homeowner’s insurance contains lightning damage.

However, if any electrical appliances stop working, even a home and contents insurance policy may not cover the cost of repairing the appliance. Also, you should check with your insurer about making any electrical repairs inside your home as that may affect your coverage. 

Usually, in Australia, you need to hire a professional electrician to carry out any inspections or repairs to the electrical system in your home. This can include conducting periodic checks to make sure the electrical wirings are not exposed to seepage, flooding, or attacks by rodents. Consider asking your insurance provider about optional coverage for fixed electrical appliances such as air-conditioners and washing machines.  

Are bikes covered under home insurance?

Ordinarily, home insurance only covers damage to your house, which can include additional buildings such as garages, sheds, and fences, as well as permanent fixtures. 

However, to protect the items located in your home or in any of these other buildings, you will likely need to purchase home and contents insurance. Even so, your bike would only be covered if it does not require separate vehicle registration, as is the case for bicycles and 50cc minibikes, but not motorcycles, and only when located on your property, parked or otherwise. 

Depending on the cost of your bicycle or minibike, you can have it listed in your home and contents insurance as a high-value item. You'll want to check your insurer’s Product Disclosure Statement (PDS) to know the normal coverage limit for a bike included as part of your home and contents insurance, as well as the incidents which are covered. 

Insuring your bicycle can be distinct to insuring any personal effects on your bike at the time, or even using the bike when you're out and about. If you want to cover those, such as something in a basket or a camera equipped to the bicycle, or the bike itself as you travel, you will likely need to purchase additional personal effects insurance. You can also read about any additional coverage available under the personal effects policy, though for full coverage, an ideal option will likely be a separate bike insurance policy.

What does home insurance cover?

What home insurance specifically covers and the extent of the coverage depends on the insurance provider and the individual policy. However, home insurance typically covers the property and other permanent structures found on or in the property, such as fences, in-ground swimming pools, garages, and dishwashers, to name a few.

There are usually two types of homeowner's insurance you can choose from, with "total replacement cover" or "sum-insured cover". 

If you’re not sure which option to take, it may be worthwhile to speak to a professional valuer to understand how much it might cost to rebuild your home and replace what's inside.

Does home insurance cover tree root damage?

While trees can add much beauty to your property, they can be an indirect cause of damage to your home. For instance, a storm could knock branches off trees on to your roof or windows. A really strong storm may even cause the tree to topple entirely. 

Home insurance may not directly cover tree damage to your house. However, the policy will likely cover the incident, such as a storm, which resulted in branches or uprooted trees falling on your home. You can check your home insurance policy’s coverage for various incidents by reading the insurer’s Product Disclosure Statement (PDS).

You should remember that trees can require regular maintenance, just like the plumbing in our homes. Insurers may check whether the tree, its roots or its branches were rotting due to a lack of care, in which case the damage caused by the tree falling on your home may not be considered accidental damage. Again, if a branch falls on your house while you’re trimming it, you may not be able to claim compensation from your insurer for the damage. If any trees are growing too close to the walls of your home, consider checking that none of the branches or roots is causing any stress to your home, which can result in structural damage.