Home and Contents Insurance

Why do I need home and contents insurance?

Getting home and contents cover is a no-brainer. You’ve probably sacrificed a lot to save up a deposit and pay down your mortgage, so why would you risk losing it all? Here’s why it’s worth every cent.

• Life happens. No matter how careful you are, you can’t predict the future. You never know when Mother Nature is going to land a tree through your roof, or when the neighbourhood gang will give your brand-new fence a fresh coat of spray paint. Home insurance is the superhero that comes in and saves the day.
• You probably can’t afford to lose everything. Unless you’re super, uber, mega rich, you most likely couldn’t afford to replace your home and everything in it if a fire tore through and burnt it to the ground. If you don’t have a several hundred thousand dollars lying around for emergencies, you need home insurance.
• It’s smart. About 60% of Aussies have home insurance, and clearly they’re onto something. These are the guys who won’t lose their life savings if their neighbour’s bathroom leaks and destroys their ceiling.
• It’s a small price to pay. If you’ve put a lot of money into an asset (like your home) then it’s sensible to ensure you don’t end up enormously out of pocket if something bad happens.

What does home and contents insurance cover?

We’ve mentioned that home and contents insurance protects your home and all your stuff, but how does it do that?

Basically, your policy will cover the repair or replacement of anything that’s damaged or stolen unexpectedly, as long as the policy says that item is eligible for protection, and as long as it was damaged or stolen due to one of the policy’s listed “events”.

Most basic policies will protect your listed items in the following circumstances:

• A storm rolls through and administers a direct hit.storms and rainwater section of your policy. If the rainwater creates a flood that destroys your things, you generally won’t be protected unless you’ve taken out optional flood cover.
• The plumbing bursts and destroys your bathroom. This falls under the escape of liquid section.
• A fire rips through and destroys it all. This is covered under the fire section of your policy, but just don’t try to sign up for a policy the day a bushfire alert goes out. You usually have to wait a few days after signing up before you can claim for bushfire.
• Local hoodlums spray-paint your house. The vandalism section has your back. Take that, rascals!
• Someone breaks in and loots the place. The theft section will cover the damage to your home and the stolen items. For really valuable items like your engagement ring, you’ll probably require an add-on called high-value contents.
• Your barbeque goes berserk and explodes. Don’t worry, most policies have an explosions section that covers any resulting damage.
• Lightning strikes. Damage from lightning is covered under – you guessed it – the lightning section. If a fire breaks out as a result then the fire section kicks in.
• A tree smashes into your house. This is covered under impact or collision.
• An earthquake or tsunami unleashes its fury. This is covered under the earthquakes section and is one of the few times your policy will cover a landslide and the actions of the sea.

Need more cover than this? An accidental damage policy might be up your alley.

In a normal home insurance policy, you're generally only covered for events listed on your certificate of insurance.

But what if you spill red wine all over your white carpet? Or the kids decide to go rogue and make the walls their new canvas?

Well, accidental cover has your back. This is an optional extra that you can purchase on top of your home and contents policy. It offers protection for those unforeseen events that just can't be predicted.

With this in mind, every insurer will define accidental incidents differently. Ensure you have a good read of the PDS so you know what you are and aren't covered for. As a general rule, if an event isn't mentioned in the exclusions, you're probably covered for it.

Do I need any additional benefits?

As you might have noticed from the above, there are a few risks missing. What about flood damage? And what if your kids are roughhousing and break a window?

Well, the beauty of home and contents insurance is that you can add a few special protections that cover your unique circumstances.

Got kids who are a bit creative? Accidental damage might have your back if they go Picasso on your walls in permanent marker.

Live in a flood zone? No problem, just add flood protection.

Here are some events a basic combined policy won’t usually cover on its own, but which you can add on for an additional premium:

• A flood wreaks havoc. Not everyone lives in a flood zone so not everyone needs flood cover, which is why this is optional. Many have been caught off guard thinking their policies automatically covered flooding when they didn’t. So to protect people who don’t read their policies, insurers have been adding this to basic policies and then requiring you to remove it if you don’t need it. So this is more like an “add-off”.
• You have two left feet. If you’re clumsy or have rambunctious kids, you’ll definitely want accidental damage cover. Basic plans exclude accidents of this nature.
• An appliance can’t take the daily grind. Standard home and contents insurance doesn’t cover appliances that blow their motors. That’s where motor burnout cover comes in.
• Something is broken or stolen outside the home. Portable contents insurance will cover items you carry outside the home, like musical instruments, jewellery and your camera.
• Your pet goes on a rampage. Pet cover not only protects you when your pet tears into your things, it will also pay for some of your vet bills if the pet is injured and it will pay for boarding your pet if your home is damaged and it can’t stay there. But don’t be fooled: it isn’t pet insurance.

How much will I actually be covered for?

Not to be smart but you’ll be covered for what you’re covered for. You get to choose what you want to cover and for how much. Assuming you want to be completely covered, you’d choose an amount that would allow you to replace everything from scratch. Then you’ll be covered for up to that amount, depending on the damage.

In addition to calculating the value of your stuff, pay attention to these areas:

• Market value. The current value of your two-year-old TV is probably less that what it would cost to buy a new one. You can save on your premium by insuring your contents for the market value as long as you're comfortable buying used.
• Extra building costs. You're not just rebuilding a destroyed house, you're demolishing the old one, paying for temporary accommodation and paying trivial costs left and right. Factor all of this in.
• A bit of cushion. The housing market is a beast of its own and an unexpected price surge could drastically increase your costs. Some insurers like Virgin Money and Budget Direct have policies options that will give you a bit of a cushion and cover you for up to 25% more than your listed value.

Your insurer is not responsible for paying you any more than what it costs to replace what's covered, so there's no point insuring something for much more than what it's worth, other than accounting for the unexpected costs mentioned above.

What won't I be covered for?

As you’ve seen, you can get a lot of mileage out of a good home and contents policy, but you do have to take some responsibility yourself because it won’t cover you for everything. Here are some common exclusions:

• You go on a long holiday. You could be denied cover if the damage happens while you’re away for too long (anywhere from 30 to 60 days or more, depending on the insurer). If you do need to be away for a while, tell your insurer in advance and see if they’ll work something out with you.
• You engage in risky business. Don’t go breaking the law or ignoring government regulations or your claim could be rejected.
• You don’t take care of your things. Don’t expect your insurer to clean up the mess if you let your home fall to pieces through poor upkeep. You insurer will expect you to repair leaks, fix holes and generally keep the place in pretty good nick.
• Your old, worn-out things. Your TV blows a fuse after 12 years? Afraid not. Your policy doesn’t cover normal wear and tear.
• Adding on. If you renovate, check in with your insurer. Otherwise that brand new deck of yours might not be covered.
• Harbouring critters. It’s your responsibility to keep your house from becoming a zoo. If your house is infested with rats or has been chewed apart by termites, your insurer won’t come anywhere near it.

Many of the individual benefit categories (flood, fire, theft etc) will have their own individual exclusions, so make sure you’re fully across those as they apply to your specific policy.

How much does home and contents insurance cost?

Not as much as it would cost to replace everything you own, that’s for sure! But seriously, it really depends on the individual. Some people own more things, some own more expensive things, some people can tolerate more risk, and some people live in environments that make claims more likely.

We got a bunch of quotes for 8 well known Australian home insurance companies and found some huge cost differences. You could easily pay half the price just by comparing policies!

For a building worth $500,000 with a contents value of $100,000, the lowest cost we found was for $90 a month and the highest cost we found was over double that at $195 a month! That's a huge $1,260 difference each year!

For our quotes for a building worth $1,000,000 with $100,000 contents value, home & contents insurance would set you back $140 a month at the least, and $288 at the most. That's equivalent to a $1,776 difference each year!

All our quotes were for the exact same 3-bedroom home in Sydney owned by a family of two.

Here are a few factors that could affect your cost:

• Your level of cover. Expect to pay more for a more comprehensive policy, higher benefit limits and more add-ons.
• Your home’s build. It’s not just about your home’s value. It’s also about how old it is and how well it’s built. A stronger house can withstand more damage and will bring your premium down.
• Your location. Not all locations are created equal. If you’re in a high crime area or on a flood plain, expect higher premiums.
• Your age (and the age of everyone else who lives there). Insurers have come to the conclusion that older policyholders are considered less likely to claim than their younger counterparts. This is good news for seniors, who may find themselves paying less.

You can do a personal assessment by visiting the websites of a few insurers and using their online calculators to grab some quotes. This will give you a better idea of the costs.

How can I save money on home and contents insurance?

We knew you were going to ask that, so here are a few tips we prepared earlier:

• Keep your eyes peeled. Most policies share a very similar structure but differ in how they calculate premiums. Once you know what you need it becomes fairly easy to compare your options, navigate their differences and settle on one that offers you better value than the others.
• Cut the fat. If you're not on a flood plain you probably don't need flood protection. Talk to your insurer about removing unneeded protection in return for a lower premium.
• Install safeguards. Insurers like to insure property that’s already secure because it means you probably won't claim as often. Find an insurer who will reward you for installing a security system.
• Opt for a higher excess. You'll pay a little more when you need to claim, but you'll save month to month. It might just be worth the risk, especially if you don’t think you’ll claim very often.
• Go deal hunting. Look hard enough and you can find discounts for buying online, being a senior, paying your premium yearly and buying multiple products from the same insurer.

What about the things I keep outside?

Got a gorgeous new outdoor dining set? Just invested in a pricey new barbeque? There’s a good chance you’ll be covered, but you may come across some limitations.

Some policies only cover items meant for open-air use, like barbeques and lawn furniture. Others will cover those items plus certain types of items from your policy’s general contents category (a listing of lower-value items that you don’t need to declare specifically).

Even if you’re covered for something left outside, you may find your insurer will only pay you a percentage of its value.

If your items are secured to the ground, such as a brick-built barbeque or a statue, you’ll find that these are covered under your buildings insurance policy.

Think you've got enough cover on your home?

We hate to be the bearers of bad news but according to the Insurance Council of Australia, 83% of Aussies don’t have enough insurance cover for their combined home and contents. This is known as underinsurance and it can be almost as bad as not having insurance at all.

Let’s say your home and everything in it was worth $2 million and a fire destroyed it all. Having your stuff insured for half that would help, but you’d still be reeling.

Here are some tips to help you avoid this fate:

• Do the maths. Be as detailed as possible in your calculations. There are plenty of online calculators to help you.
• Don’t cut corners. Don’t insure something important for lower than what it’s worth, and don’t pass on extras you know you might need (like flood cover when you’re on a flood plain). You might save a few bucks on your premium but find yourself on the hook for thousands if you ever need to claim.
• Details, details, details. Sometimes the devil is in the detail. For example, your contents protection might give you $50,000 worth of cover but cap your payout at $2,000 per item. If your $10,000 wedding ring gets stolen, a $2,000 payout probably won’t cheer you up much. In this instance, you’d need to declare the ring separately.
• Review early, review often. There’s a good chance the value of your stuff will change over time. Property values never stay the same, and you'll always be bringing new gadgets into your house. If the value of everything changes, adjust your cover as necessary.

Can I expand on an existing policy to add more cover?

Of course! If you need to add to your policy for any reason, just call up the insurer and adjust away. Here are some reasons you may want to upgrade mid-policy:

• Property rates have skyrocketed. You’ll definitely want to increase the benefit limit on your home.
• You’ve gone on a spending spree. A new TV, washer, tablet and barbeque later and your contents policy suddenly seems too low. Time to increase the benefit limit.
• You splurged on a high-ticket item. You just had to have that expensive piece of post-impressionist art that your partner lovingly described as “gaudy”. Time to add it to your policy as a high-value item.
• Those add-ons were important after all. That optional flood protection suddenly looks attractive after the latest downpour.

Here are the steps you need to take to expand your cover:

1. Reach out. Give your insurer a call and tell them what you need. They may want to send someone by to confirm the new value of the insured items.
2. Pay up. Money talks. The insurer won't make the change unless you pay first.
3. Get proof. Your certificate of insurance includes important details about your policy and offers proof that your home and/or contents are insured.

Can I insure my home and contents separately with different companies?

Sure, but in most cases it’s probably not worth the effort. If all you need is something super simple, you might save a buck or two by getting two separate policies. But as soon as you start tweaking things you may find the savings dwindle.

Let’s say you buy home and contents policies and add flood cover to each. You're already talking four products. You’re more likely to get a discount on all that with one company than if you split the purchases. Not to mention the time saved on paperwork.

By all means search around for the best deals, but be aware of the hidden costs in both money and time.

How do I make a home and contents claim?

Making a claim is usually straightforward. Here's what you need to do:

1. Alert the authorities. If there was a crime, call the police to file a report. Otherwise, move on to step 2.
2. Alert the insurer. Ring up your insurer as soon as possible so they’re aware a claim is on the way. They’ll let you know if they need you to do anything specific.
3. Make a detailed claim. Submit a claim form with all the details. You can often do this over the phone or online.
4. Gather evidence. The insurer will want supporting evidence, such as a police report, photographs, proof of ownership and receipts.
5. Let the inspector in. The insurer might send someone out to assess the damage, arrange emergency repairs and obtain quotes.
6. Wait. Sit back while the insurer processes your claim. They’ll notify you of the outcome as soon as they can.

Got some questions? You're not the only one.

• I’m renting – what home and contents insurance do I need?

  Check out the finder.com.au guide to renter’s insurance for more information on how to find the insurance cover you need. You'll probably only need contents insurance.

• I’m a landlord – what home and contents insurance do I need?

  There’s a special form of home and contents insurance designed specifically for you known as landlord insurance. It works similarly to regular home and contents insurance but adds a few bits of protection that a landlord might appreciate (such as loss of rental income).

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  This depends on the conditions of your policy but if you have signed a rental agreement which stipulates that you are legally responsible for the items you rented, they will usually be insured under your contents policy.

• Which policy covers loss or damage to my carpets?

  Carpets are considered contents and are covered by contents insurance.

• I’m going away for an extended holiday – do I need to tell my insurer?

  This will depend on the length of your trip. Many insurers won’t cover you if you leave your home unoccupied for an extended period, usually 60 consecutive days or more, but may agree to cover you if you notify them of your travel plans and take steps to ensure that your home is looked after while you’re away.

• Will my home and contents insurance cover the personal belongings my guests bring with them when they visit my home?

  Many (but not all) insurers provide cover for guests’ contents, so check your PDS to find out if this benefit is included in your policy.

• Is it possible to get standalone home insurance or standalone contents insurance?

  Yes. You can get home building cover and home contents cover as separate, standalone policies, or you can combine the two types of insurance together to provide comprehensive protection.

• Will I need to pay an excess when I need to make a claim?

  Yes, you will usually be required to pay an excess. However, you usually have the option to adjust your excess when you apply for cover.

• What’s the difference between a defined events policy and an accidental damage policy?

  Generally speaking, a defined events provides cover for loss or damage caused by any event listed in your policy, including fire, storm, explosion, theft and vandalism. Accidental damage policies usually cover all these same events, but with the added inclusion of cover for accidental damage to your home and contents.

• Are my pets covered by my home and contents insurance?

  Some insurers will allow you to add pet cover that provides a benefit to help you pay vet bills when your pet suffers an accidental injury.

• How can I switch home and contents insurers?

  When your current policy is up for renewal, shop around to see what other policies are available. Compare quotes, features and limits across a range of policies to see if you can find better-value cover. If you find a suitable policy, you can apply for cover online or over the phone.

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Alexandra Koster

Alexandra Koster is Finder's Publisher for car, home and pet insurance. Her hobbies include reading product disclosure statements and deciphering complicated insurance lingo to help people save on their insurance so that they can spend their money on better things – like dogs. She has a Bachelor of Arts in Film and Cultural Studies from the University of Sydney.