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What is included in your home and contents insurance policy?

What is included in your home and contents insurance policy?

We all want to protect our homes and valuables from unforeseen disasters, but in case the worst does happen, you need to know you are financially able to renovate the house and recover  at least the cost of the valuables. This is where home and contents insurance comes in. 

Australian insurers offer a combined home and contents insurance policy, which typically costs less than buying separate insurance policies. If you are considering buying such a policy, make sure to check that it covers all your high-value items adequately.

Why do I need home and contents insurance?

Purchasing a home and contents insurance policy is one way to reduce any financial stress you may have about damage to your home and belongings. Usually, this kind of policy pays for the cost of renovating or repairing your home, including any permanent fixtures on your property such as fences, sheds, and solar panels.

In addition, it also helps you recover the cost of your possessions which may be damaged, vandalised, or stolen. Some insurers may also cover the cost of any urgent repairs needed to prevent further damage after a disaster. 

Consider checking the optional coverage your insurer may be able to provide. For instance, will the insurance provider pay for you renting another house temporarily while your home is being renovated or repaired? Also, if you need to tear down and rebuild your home but are still paying off your home loan, ask if your policy covers a discharge fee for the mortgage.

  • Since the details of an insurance policy vary with each provider, you should read your insurer’s Product Disclosure Statement (PDS) to know more about the perilous events covered by the policy and the coverage limits as well as the exclusions. 

How much does home and contents insurance cost?

The premium, or the cost of your home and contents insurance policy, depends on the type of home insurance coverage you prefer. You can opt for either insured sum coverage, which is a predetermined, fixed amount, or for total replacement cost coverage, which pays for rebuilding your home from scratch after a disaster.

The insurance premium also depends on how much excess you choose to pay, which can be a percentage of either the insured sum or the replacement cost. You’ll likely also need to list the value of your possessions, particularly high-value items like smart TVs, jewellery, and collectibles, and check how much coverage the insurance provider offers for each.

While you need to make sure that your policy covers the full value of your belongings, you can choose the coverage limits and inclusions based on the premium you are comfortable paying. For instance, you may want to buy a standalone insurance policy for some high-value items, even if it costs you more, to ensure that you cover the full value of the item.

Adding other types of optional coverage, such as personal effects cover for items that you carry with you while travelling, or coverage for specific high-value jewellery, can also drive up the premium you pay for your insurance policy. 

You may need to pay a higher premium if you live in an area prone to incidents like floods or thefts, and you may also need to purchase additional coverage for the specific incident to avoid ending up underinsured. Consider checking with your local council office or your neighbours to know if your home is in an area prone to floods or bushfires before you negotiate the details of your home and contents insurance policy. For instance, you can find out about your home’s Bushfire Attack Level (BAL) rating and compare insurance quotes for similarly rated properties.

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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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