Looking for low cost home and contents insurance but don't want to skimp on value? Steps to find affordable cover that won't leave you stranded
As one of the most underinsured nations in the developed world, many Australian's simply purchase home insurance without taking the time to work out how much cover they actually require. Nobody want's to pay too much for cover but rushing the buying process could mean you are seriously underinsured AND paying too much. Whether your looking for cover for your new home or looking to switch from your existing policy, there are some key steps to take to ensure you get what's right for you.
Read on for some key tips on how to reduce the price of your home insurance without sacrificing the quality of your cover.
Compare basic home insurance policies from Australian brands
How to save on home and contents
- May only need contents insurance. You only need building insurance if you own the the actual dwelling or (freehold) of the billing. If you are renting, opt for contents only insurance.
- Compare quotes from multiple insurers. Don’t simply accept the first home and contents insurance quote you get. Compare quotes from at least three different insurers - this is quick and easy to do online - and shop around for a deal.
- Don’t over-insure. Adding on or “rounding up” the value of your items will increase the total premium that you pay. Determine the true value of the item to avoid a hefty premium or conviction of fraud.
- Entitled to a Loyalty discount. Many providers will offer to cut the price of your cover if you’ve been with them for a number of years. Don’t be afraid to ask for your loyalty to be rewarded.
- Pay your premium annually. Most insurers will let you choose a premium frequency (how often you pay per annum) when applying for cover. Paying annually as oppose to monthly could save you in the long-run.
- Purchase cover online. Many insurers will apply a discount to your premium if you purchase your insurance online.
- Receive a multi-policy discount. If you hold multiple policies with the same insurer you may be entitled to a discount on your home and contents premium.
- Choose a higher excess. If you can afford to do so, choosing a higher excess can result in a lower premium. Be warned this is also a trap of going with a cheaper policy.
- Keep your house secure. Security systems and alarms can act as a deterrent to thieves, while smoke alarms can reduce the risk of your home being damaged by fire. Installing these items can reduce the cost of your home and contents premiums.
- Don’t just renew...you could find better. It’s a well publicised fact that insurers regularly offer better deals to new customers than they do to renewing policyholders. So next time your policy renewal arrives in the mail, don’t just automatically continue your cover; shop around to see if there’s a better deal out there.
Hot Tip: Keep Your Receipts
Give yourself the best chance of having your claim honoured by keeping receipts of goods and photos of items to ensure you have proof of purchase for your insurer. It may be tedious but determining the true value of high value items will mean you are insured for the right amount, not paying too much for cover and you won't suffer any headaches at claim time
What impacts the cost of my cover?
The price you pay for cover is generally based on;
- The policy you choose. A comprehensive policy with all the “bells and whistles” will generally cost more than the basic cover option. Assess if a basic policy will suffice for your situation.
- How your home is used. If your home is used for business purposes or is left unoccupied for long periods of time you may be required to pay an additional cost for cover.
- The location of your home. Insurance providers draw on claims data, crime rates, risk of flood and fire among other factors to help assess the level of each location presents. It can be worth taking some time to research where you are buying to determine what could impact the rate you pay for cover.
- Your claims history. An insurance company will consider previous claims you have made when determining what you pay for cover. Minor and major claims can impact what you will pay so it is worth having a look at different options available and speaking with your insurer about how you will be assessed.
- Style of your home. Insurers will also consider the style/construction period of your home to help them determine a suitable rate. This is usually broken up into the following categories;
- Victorian (1840-1890)
- Federation (1891-1913)
- War (1915-1945)
- Post War (1946-1959)
- Contemporary (Project style and 1960-Present)
- The construction standard of your home. The actual design features and construction standard of your home will also impact what you pay with insurers usually rating dwellings in loose categories of average, quality and prestige. Things considered may include;
- Complex architectural design
- Extensive electrical facilities
- Granite kitchen bench tops
- Porcelain tiling
- Frameless shower screens
- If your home is built on flat or sloping land. Insurers will also need to know the aspect of the land your home is situated on to help them to determine what you will pay. This is usually broken down into the following categories;
- Gentle slope (5 degrees)
- Moderate slope (15 degrees)
- Severe slope (35 degrees)
What will most policies cover?
Depending on your needs, you can choose to take out home insurance and contents insurance separately, or combine the two options into one home and contents policy. Home insurance covers the bricks and mortar of your home, including the;
- Any outbuildings
It also provides cover for the physical structure of your home in the event of;
- Malicious acts
- Water from leaking pipes
Legal liability cover is also typically included.
There are three different types of home insurance policies available;
- Sum-Insured: Under a sum insured policy, you will be paid a benefit up to the specified limit shown on your certificate of insurance
- Extended Replacement: If you opt for an extended replacement policy, you’ll be able to take advantage of being paid a specified percentage (such as 35 or 30 per cent) above the sum insured amount to help you rebuild your home
- Total replacement: Total replacement policies guarantee to cover the cost to repair or replace your building, no matter what much that expense might be
Contents Only Insurance
Contents insurance covers the items kept inside your home, including furniture, appliances, home entertainment systems and jewellery. If your precious belongings are stolen or damaged by fire, flood, storm, water leakage, explosion or a range of other risks, contents insurance will cover the cost of their repair or replacement.
Cover can also be purchased for items;
- Kept on common property
- Lost/damaged in transit
- Belonging to visitors
- Temporarily removed (i.e. if you are staying at a hotel)
- In commercial storage
How much cover do I need?
When it comes to home insurance, calculate how much it would cost to completely rebuild your home, including any outbuildings, if it was destroyed. You’ll also need to look at whether your policy covers additional losses such as;
- Demolition costs
- Removal of debris
- Temporary accommodation costs
- Architect’s fees
As for contents cover, think about all the items in your house that you would have to replace if they were damaged or destroyed. Take some time going from room to room and estimating how much it will cost to replace everything, including items like cutlery, crockery, jewellery and even your DVD collection. Some policies may have per-item limits that apply to your contents cover, while others may allow you to add extra cover for your valuables.
- Some handy tips to determine an adequate level of cover for your policy include;
- Determine how much it would cost to rebuild your home now rather than when you first purchased it
- Take into consideration the style of your home, value of materials used and the overall building structure
- Consider cost of professional assistance from surveyors, architects, designers and engineers
Is it worth getting full-value protection?
Some insurers now offer whats known as full-value protection which will provide cover for the full cost of rebuilding your home provided sufficient information has been provided at the time of application. This option is often referred to as Safeguard which allows you to extend the cover you receive by an additional amount (usually up to 25%) if the amount your home is insured for isn't enough to replace or repair the damage to your home.
Who needs cover?
- Homeowners. If you’ve taken out a mortgage to buy your home, most lenders will have already insisted that you have sufficient home insurance in place to cover the cost of replacing your home. Contents insurance is also important, as you could lose everything you own if your house burns down or is ravaged in a severe storm. With this in mind, a combined home and contents policy is an option for homeowners, although those who own a strata titled property may only need contents cover.
- Renters. Renters obviously don’t need home insurance because they don’t own the property they live in. If the property is damaged by something outside your control, such as a plumbing problem or a storm, it’s up to your landlord to cover the cost of repair or replacement. However, renters can still benefit from contents insurance to cover their furniture, electrical goods, appliances and other valuables.
- Landlords. Landlords insurance is a special form of home and contents insurance designed specially for landlords. It offers cover for the home in case of fire, theft and many other specified events, while it also offers certain elements of contents insurance by covering carpets, light fittings, curtains and plumbed-in or wired-in appliances. In addition, landlords insurance can offer protection against theft or malicious damage by tenants, not to mention loss of rent in certain circumstances.
Make sure you check the fine print...
When shopping for home and contents insurance, it’s important to read the fine print so that you know exactly what your policy does and doesn’t cover. However, some of the technical jargon contained in a home and contents insurance PDS can be downright confusing, so here’s a quick rundown of what the following terms mean:
- Covered for accidental damage? Does your policy cover accidental damage, such as if your kids decide to ‘redecorate’ your walls with texta? This is included as standard on some policies and as an optional extra on others, so check the PDS. This should not be confused with accidental breakage, which typically only applies to glass and ceramics.
- Covered if away from home? If you’re heading away on holiday for 30 days or more, this may restrict or even void your cover. You may need to notify your insurer before travelling.
- Goods in transit? This cover usually applies to your contents when you are moving house. Various sub limits and conditions apply, with many insurers not even covering accidental damage to contents in transit.
- Only covered for defined events? The vast majority of home and contents insurance policies only cover you against defined events. These include fire, storm, flood, lightning, explosion, impact, earthquake, theft, vandalism, malicious acts, landslide, damage by animals, water or liquid damage.
- New-for-old replacement? As the phrasing suggests, many insurers will replace your damaged old items with new ones. However, this isn’t always the case - if it’s cheaper to repair an item than replace it, they will often do so.
- How is water damage actually covered? Conditions around how water is covered can vary greatly between insurers, especially for losses from storms and floods. Make sure you know exactly how you are covered for these events and if damage from leaking roofs is excluded. Many insurers don’t include cover for flood damage caused by rivers, creeks, dams, lakes or reservoirs.
- How are you actually insured? Some policies will provide cover up to the amount shown on your certificate of insurance, otherwise known as the sum insured. Make sure you calculate the cost of replacing everything to be certain you don’t end up under-insured.
Review Regularly to Avoid Underinsurance
Many Australians adopt a ‘set and forget’ approach when it comes to home and contents cover, but this fails to take into account that our circumstances and the assets we own are constantly changing. This leads to a risk of being under-insured, which can end up leaving you significantly out of pocket or even in dire financial straits when disaster strikes.
The best way to combat under-insurance is to regularly review your level of cover to determine whether or not it is adequate and if you could be better off switching to a more suitable option.
Q. I’ve changed the security system at my property - do I need to let my insurer know?
- A. Yes, any changes to your security system could change the terms of your insurance. They could also entitle you to a discount because you will be less likely to suffer loss caused by thieves.
Q. I’ve started running a business out of my home - do I need to tell my insurer?
- A. Yes. Once again, this may affect an insurer’s decision to insure you, and you have a duty of disclosure to let your insurer know anything that may influence their decision to offer you cover.
Q. Does home and contents insurance cover flood?
- A. Yes, many providers do include flood protection in their home and contents policies. However, make sure to check the fine print for any exclusions that may apply.
Q. Will my premiums increase if my situation doesn’t change?
- A. It is possible that what you pay for cover may increase even if your situation doesn’t based on other factors such as where you live.
Q. What type of security measures may reduce my premiums?
- Two-cylinder deadlocks fitted to external doors
- Locks fitted to sliding doors
- Security screens fitted to windows
- Single-cylinder locks fitted to windows
- Alarm system fitted to home
Q. What sort of policy covers my carpets?
- A. Carpets are covered as part of a contents insurance policy.
Q. Are the possessions of visitors to my house covered?"]
- A. Many insurers will offer some cover for contents owned by invited visitors, but check your PDS to see what limits apply to cover.
Receive a quote for home and contents insurance
Home and contents insurance offers crucial protection for Australian homeowners, but it’s vital that you compare your options before deciding on just one policy. This is the way to ensure that you end up with the right type and level of cover for your situation. If your ready to receive a quote for cover, review the different options in the table above and follow the secure link through to the insurers website.