Co-author: TJ Ryan
While we can’t compensate for the sentimental value attached to our belongings if they are lost, stolen or damaged, it is possible to help compensate for the financial loss through contents insurance.
Australian Bushfire information and updates: Resources here.
What is contents insurance?
Contents insurance provides a level of financial protection against damage, theft or loss of personal possessions – the ‘contents’ of your home. This may include anything from a pair of designer sunglasses to a flatscreen TV, to your furniture and carpets.
If you have contents insurance, many household items should be automatically covered under your policy’s general contents provisions, but you may need to specifically list particularly expensive items within the policy, such as fine jewellery or artwork. Be aware that there may be dollar limits that can be claimed per item and that depending on the policy, higher premiums may apply if you choose to take out this additional cover.
Some homeowners combine their contents insurance with their home insurance policy to make one single policy – home and contents insurance.
But contents insurance is not just for homeowners. If you are renting, you may choose to purchase contents insurance to cover your belongings, as these items will usually not be included under a landlord’s insurance policy.
Types of content insurance
There are two main types of contents insurance you can choose from. There are policies that cover the value of your belongings and policies that replace your possessions with new items, known as new-for-old. The type of insurance you choose will affect the premium you pay.
Value of your belongings
Some policies may only cover the value of your belongings, which can depreciate over time. This means in the event of a claimable incident, the money you receive from the insurer to replace or repair your items may not adequately cover your loss.
New-for-old policies mean your belongings are covered for the full cost of replacing them with new items, sometimes at a higher price than what they were valued at originally. The premium for this type of insurance will generally be more expensive than the value-only option.
What is covered under my contents insurance?
There are different levels of cover when it comes to your contents insurance. Depending on the policy and provider you choose, your contents insurance may include the following cover:
Standard contents – defined events
The majority of contents insurance policies will provide protection for your possessions if they are lost through a defined event, which, depending on the policy may include occurrences such as burglary, fire, storm or vandalism. Standard forms of contents insurance may also offer additional benefits, depending on the policy. These may include reimbursing you for the costs associated with things such as:
- Emergency repairs and protection of the building to prevent further damage or loss to your contents from an insured event. This may include replacing locks and keys after a break-in.
- Alternative accommodation for you and your pets. This is if your contents are damaged by a defined/insured event to such an extent that your home is now unliveable. The insurer may also pay moving and storage fees for your contents in this scenario.
- Debris removal. Paying for the costs of removing debris if your contents are damaged or destroyed by a defined/insured event.
- Spoilage of perishable food, or medicine up to certain benefit limits.
- Coverage for your contents while you are moving home within Australia, usually for up to 14 days.
- Damage to or loss of guests’ personal possessions while they are visiting the property during an insured event, up to certain benefit limits.
Per item and total limits may apply to some items under your standard policy. These items are usually valuable in nature such as jewellery, cameras, artwork or laptops. If you need to insure these items for more than their set limits, you may be able to list them separately on your policy as a specified item, so you can cover them for their full amount. Specifying items for extra cover will typically add to the cost of your insurance.
Some policies will offer accidental damage as a standard inclusion, or as an optional extra at an increased premium. This cover will help protect your belongings against the cost of incidents which are unintentional in nature, such as breaking a glass mirror or spilling wine on the carpet.
This type of cover may be included in your standard policy or offered as an optional extra with an increased premium. It typically will include cover for the loss of or damage to your possessions caused by flood or flood water (combined with run-off and rainwater).
There may be an exclusion period which applies to cover of this kind, such as being unable to claim within the first 72 hours of your policy commencing. Check with your provider or read the product disclosure statement (PDS) and other policy documentation.
Some policies may cover motor burnout as an optional extra. This will typically cover the reasonable cost to repair and replace burnt out electric motors in household equipment or appliances which are part of your insured contents. This cover may only be available to items under a certain age.
Portable contents cover may be included in your standard contents cover, or available as an optional cover at an extra cost. This insurance can cover items designed to leave your insured address with you, such as a handbag, smartphone or laptop, or items on you such as spectacles, jewellery or clothing. It typically covers these items for theft, accidental loss or damage while you are away from home anywhere in Australia and New Zealand and in some policies, when you are overseas in any part of the world for a certain period of time. For example, if your laptop travels with you from home to work and back, or on an overseas trip with you, then it could be protected by this portable cover.
There are usually two types of portable contents cover:
- Unlisted – For this cover you can typically choose from available limits per item and the total sum insured for all items per claim, without having to list them individually on your policy. The limits on offer will be set out by your insurer and will have a maximum payout amount.
- Listed – For this cover you may be able to insure certain items separately for their full value, by listing them individually on your policy and providing a replacement value on the item. You will be required to pay an additional premium for listed or specified items.
What is not covered by contents insurance?
There are a range of exclusions which may apply to your contents insurance. Depending on the policy, these may include –
- The building you live in, or any permanent fixtures. If you need cover for these and you own the home you’re living in, home insurance may be an option for you.
- Intentional or criminal acts. If you, family members, guests or tenants commit deliberate or malicious acts that lead to the loss or damage of your personal possessions, then you may not be covered.
- Lawful seizure of your contents. You may not be covered if your items have been confiscated by the police, a government authority or someone with the legal authority to do so.
- Wear and tear of your contents. This may include depreciation, gradual deterioration or lack of maintenance.
- Inherent defects. If your contents carry inherent defects, including faulty design, structural defects or poor workmanship, then they may not be covered under contents insurance.
- Contents acquired illegally. This may also include items that are illegally held.
- Lack of care & security. You may not be covered for loss resulting from your failure to take care of your contents or to secure them properly.
- Lost property. If your possessions have been mislaid or are missing and there is no single identifiable event to account for the loss, then you may not be covered. If you have portable contents insurance, then this exclusion may not apply to items covered under that policy.
- Mechanical or electrical failure. You may not be covered for this failure unless you have adequate motor burnout cover.
- Nuclear contamination, war, terrorism or actions at sea. Contents which have been lost or damaged as a result of nuclear contamination, war or warlike operations, terrorism, or actions or movements at sea may not be covered.
Having adequate cover for your contents
If you decide to take out contents insurance, it could be a good idea to calculate the amount of contents insurance you need carefully so you don’t run the risk of being underinsured.
Before taking out a contents insurance policy consider going room by room and listing all of your belongings and working out how much it would cost to replace them at today’s prices. To help assist in assessing the price and condition of your items, it may be a good idea to keep receipts, warranty certificates or photos of your possessions. This evidence may also come in handy if you need to show proof of ownership when making a claim. If you need further help in determining the value of your contents, The Insurance Council of Australia’s website, Understand Insurance, has a contents insurance calculator.
In addition to assessing the value of your belongings, it is also important to read the product disclosure statement (PDS) before choosing a policy and your certificate of insurance (your policy document) for your current insurance, as the terms and conditions of cover will vary between insurers.
How are premiums determined?
Your provider may take into account a range of factors when calculating your contents insurance premium, such as:
- The level of cover you choose
- Whether you include any optional extras
- The excess amount you choose
- Your age and the age of other people listed on your policy
- Your claims history
- The amount your contents are insured for (your sum insured)
- Location of your home and any specific risks associated with this location, including crime rates and risks associated with natural disasters e.g. floods, cyclones, bush fires
- Features of your home including security measures, or structure of the building
Ways to save on your premium
There may be ways for you to reduce the cost of your contents insurance, depending on what your insurer is able to offer.
Secure your home
Some insurance companies may reduce your premium if you install security and safety features in your home, such as deadbolt locks, smoke alarms, security systems or fire extinguishers. This may help secure your contents from damage or theft and thus reduce the likelihood of you having to make a claim.
You may be eligible for certain discounts from your insurer such as:
- Linked policy discount: Some insurers may offer a discount for combining your home and contents insurance into one policy.
- Multi-policy discount: If you hold more than one policy with your insurer, such as car and home insurance, then you may be entitled to a discount when taking out contents insurance with them as well.
- No-claims bonus: Some insurers may reduce the cost of your insurance when you don’t make any claims on your policy.
- Buy online: If you purchase a contents insurance policy online, you may be eligible for considerable discounts, depending on your insurer.
If you are looking to take out your first contents only or combined home and contents policy, it may be a good idea to compare different cover options and to ask for quotes from multiple providers to find a policy that suits your needs and budget. If you already have a contents insurance policy, consider reviewing your options to see if you can find better value for money elsewhere.
How to choose a contents insurance policy
Apart from the premium on offer, other factors to consider when assessing the value of a contents insurance policy may include:
- Claim process: How can claims be made? Is there a 24-hour helpline? Can you make claims or check the progress of claims online or by phone?
- Defined events: What “defined events” or “insured events” are covered under the insurance policy? Depending on the policy, defined events may include things such as earthquake, explosions, fire and flood, but do not usually include accidental damage by default.
- Value of your belongings or new-for-old: What type of cover does my policy provide?
- Accidental damage: What accidental cover in general and specific cover for glass and other breakable items is available?
- Flood cover: What are the specific conditions on flood related cover?
- Content inclusions and exclusions: What is included under the contents definition? What are the specific features in terms of new for old replacement? Are items left outdoors covered? Are portable items (like a mobile phone or laptop) covered?
- Cover limits: What is the maximum dollar claim allowed for general items on a per-item basis?
- Theft: What conditions apply to theft or attempted theft? Are you covered if there was no forced entry? Are the belongings of your guests covered while they are visiting you?
- Excess: How much excess will you need to pay when you make a claim and can you adjust the amount? Are there multiple excesses that apply?
Cover image source: Viktoriia Hnatiuk (Shutterstock)