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Depending on the level of cover, contents insurance policies are designed to offer financial support in the case that some of your household belongings or possessions are damaged, lost or stolen. Typically, a contents insurance policy will cover your belongings, and the belongings that are the property of family members that live with you subject to any policy limits or exclusions. For example, possessions such as clothes, jewellery, white goods, appliances, computers, TV’s and sporting equipment.
New-for-old policies make up the first category. Under a new-for-old policy, your insurer will cover the replacement cost of your lost, damaged or stolen items with their new equivalents. These policies are typically the more expensive of the two categories. The monetary value of a new equivalent usually outstrips the value of the item that was in your possession. But ‘equivalent’ is the crucial term. For example, don’t go expecting those old golf clubs to be replaced with a brand-new set of Callaway’s.
The second category of contents insurance policies are those that cover the value of your items at the point that they are damaged, lost or stolen. These policies can be cheaper, as the amount of cover they provide will typically drop over time along with the depreciating value of your household items and belongings. With replacement at value policies, it can be beneficial to review the extent of your cover at regular intervals. This could help ensure that the extent of your cover adequately reflects the value of your insured belongings.
In some cases when you claim, insurers may repair or replace the damaged items, or pay you the amount it would cost to repair or replace them.
When considering taking out insurance, there are some further things that you may want to consider:
Perhaps the most commonly overlooked is the claims process. A claims process can vary from provider to provider. If you ever find yourself needing to make a claim, you’ll be glad that you went with a provider that understands the importance of strong customer service.
Poorly configured claims processes add stress and uncertainty to situations that are already stressful and uncertain. It can be beneficial to look at providers who have a 24-hour helpline, a strong reputation for customer support, and provide accessible avenues through which you can make a claim.
Contents insurance policies are usually designed so that they come into effect following something called a ‘defined event’. These defined events set the conditions under which you become eligible to make a claim. Importantly, they also inform the exclusions of many policies.
Generally speaking, if your policy doesn’t explicitly define something like flooding as an event in which you’re eligible to make a contents insurance claim, that policy will not cover any damage or loss that results from a flood. Take the time to familiarise yourself with the defined events and exclusions in the product disclosure statement of a contents insurance policy before making a commitment.
Depending on the level of cover, the cost of your contents insurance policy can depend on some key variables, including but not limited to:
Even if you’re renting, you could consider taking out a policy that protects you from the financial burden of starting over in the event that your belongings are lost, damaged or stolen. Your landlord could potentially have taken out insurance on the house itself, but it’s unlikely that their policy covers any of your possessions.
Last updated: 27/05/2020