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In this article you’ll learn what to look for in home and contents insurance, and how to make sure you’re protected against the potential risks in your area.
Many insurers package home insurance and contents insurance into a single insurance policy1. But you can also purchase them individually. By knowing what each offers, you can choose a suitable option for you.
One of the main types of home insurance policy is a sum-insured policy. This cover insures you for an amount that you chose when purchasing the policy. This amount should cover repairs, or a rebuild of your home after an insured event, as long as you’ve calculated the cost accurately.
It’s important to note that if you over-insure your home, you’ll still only be reimbursed for the amount it would cost to replace your original home. For example, if your home would cost $500,000 to rebuild, but you purchase home insurance cover to the value of $800,000 – your home will only be re-built to the value of $500,000.
Contents insurance is equally important for homeowners and tenants. It can cover you for the cost of accidental damage or loss of your personal possessions2. Some insurers cover any accidental event, while others are more specific about which types of events they cover.
Contents insurance covers insured possessions you keep at home, and provides limited cover for things you take outside the house. Make sure to review the fine print of your policy, as some can exclude items such as laptops, mobile phones, cash, and high value collectables.
New for old replacement covers you for a new item that replaces an old one that’s been damaged, or stolen2. When making this kind of claim, you may receive either a new version of the original possession, or an updated version. For example, if your television is stolen or damaged, you may receive either a new version of the same model, or a newer version – depending on your insurer, the nature of the claim, and the possession type.
Usually, your contents and new for old replacement policy will be up to a sum-insured amount. Meaning, you will determine the value of your contents and what you would like to have covered up to a certain value when purchasing your policy.
If you have a lot of expensive jewellery or collectable items, you should check whether your policy covers their full value2. Some insurers only offer limited cover but give you the option of paying extra to cover these types of items.
It’s vital that you choose appropriote level of cover for your home and contents. Otherwise, you could end up having to cover the cost of repairs, or replacing your possessions.
Figuring out how much it would cost to rebuild your home isn’t easy. Here are some tips that may help you accurately calculate the cost of a rebuild3:
1. Calculate using elemental estimating rather than cost per square metre
Elemental estimating allows you to enter plenty of details about your home, which helps to give you a more accurate figure.
2. Opt for calculators that ask you a lot of questions about your unique home
Calculators that use a cost-per-square-metre method typically ask fewer questions, and either under or overestimate the costs. This is because they assign averages based on house size, rather than accounting for things like unique features, age, or quality of materials.
3. Use a few calculators to get a more accurate average
Calculators vary greatly, so it’s a good idea to use a few to see the differences. This should help you to gain a better understanding of the true costs of rebuilding your home.
4. Check regularly to make sure the figure is relevant to current prices
It’s important to check how much you’re insured for, and redo your calculations regularly. Otherwise, you may find yourself without sufficient cover when a rebuild costs more than you expected in today’s prices1.
It’s easy to underestimate how much stuff you actually have, as well as its real value. The following tips may help you come to a more accurate figure2:
In the case of a burglary or fire, your computer may be stolen or destroyed, so it’s a good idea to keep your list of possessions in the cloud or somewhere other than in your home2.
Australia is known for a variety of severe weather events and natural disasters. Depending on where you live, you may need cover for4:
When you’re looking for policies that cover specific events, keep in mind that cover can differ greatly between insurers. It’s essential to read the product disclosure statement to find out exactly what each policy includes.
Otherwise, you may think you’re covered when you’re actually not. One example of this is cover for bushfires5: some policies insure you for all damage, while others only insure you for damage caused by an actual flame.
By choosing suitable home and contents insurance, you can reduce the financial risk of living in areas where these events occur. You can also gain peace of mind that your insured possessions are covered in a burglary or other event that’s out of your control.
Click here to view iSelect’s range of home & contents providers, and select the one which suits you.