Living in a rental property? Make sure rent is the only price you pay.
You might be living in someone else's house, but this place is still your home. It's got all your stuff in it - your laptop, your book collection, and the love of your life - your Xbox.
But what would you do if someone decided to nick your laptop? What if someone decides to leave the stove on and burns down the house? You could be coming face-to-face with a whole lot of debt.
So how do you protect yourself? It's actually pretty easy. Just get renters insurance.
We put together this guide on why renters insurance will be your new best friend.
Want to protect your belongings?
What types of insurance are there?
Renters insurance can be divided into two main categories:
- Fire and theft. This low-cost insurance covers your belongings from fire and theft, which are the two most common types of damage that renters face. It's a straightforward and affordable option, but it doesn't cover anything other than fire and theft, and tends to have lower maximums.
- Comprehensive cover. This type of cover gives you protection for a wider variety of hazards, and includes options for liability insurance. It protects your belongings from other risks in addition to fire and theft. Liability cover helps you pay any legal and/or medical fees that may be incurred if other parties are injured on the property.
Why do I need renters insurance?
Whilst you may not own your home, your possessions still hold value and it’s important to protect them.
Keep in mind the following:
- You are not covered by your landlord’s insurance. Many renters assume that a landlord’s insurance will cover the renter's contents as well, which unfortunately is not the case.
- Your assets add up to more than you might think. If your home is gutted by fire and you have to replace everything you own, you might have to fork out tens of thousands of dollars to replace your possessions.
- You can still obtain insurance if you live in a share house. The process of purchasing a policy for the contents of shared accommodation does take a little extra effort, but it might prove incredibly valuable if, for instance, you’re a student who depends on an expensive computer and specialised equipment.
- You might benefit from liability cover. If someone injures themselves in your home you could be liable for hefty medical and legal fees. Liability cover might help you cover the costs.
What affects the cost of renters insurance?
The cost of your insurance premium will be calculated on the basis of several factors:
- The location of your home. Premiums are normally higher if you live in a bushfire-prone area, or in a neighbourhood with a high crime rate.
- Your home security. Deadbolts, window locks, cameras, and alarms all help to make your insurance cheaper, as do deterrents such as CCTV cameras or an alarm system.
- Your level of cover. Naturally, the more optional extras you select, the more your premiums will increase. For example, if you opt for cover that will replace lost items with new ones, it will be more expensive than covering the replacement value, which depreciates over time.
What does my policy actually cover?
As with other types of insurance, inclusions and options vary greatly from one policy to another, and also depend on which provider you choose. Many of the items listed in the table below are included as standard with some policies but will cost extra if you buy cheaper, more basic insurance.
Think carefully about what would you’re most worried about replacing in the event of damage or theft, and check which policy offers the best value for those items. For example, if you don’t have expensive jewellery, but your chest freezer contains a month’s worth of food, being covered for food spoilage would be an important consideration.
Or consider a hailstorm; this would be far more likely to damage the actual building rather than the furniture inside it, so it’s less important for a renter to get hail cover than it would be for a homeowner or landlord.
Make sure you read your policy's product disclosure statement (PDS) carefully so you know exactly what you’re covered for.
|Cover||What it includes|
|Theft||Objects lost due to theft, and damage to other belongings during the robbery.|
|Fire||Only covers fire damage to belongings. Does not cover damage such as cigarette burns or scorch marks.|
|Storm||Damage to possessions caused by wind, hail and other storm effects.|
|Impact||Possessions damaged from direct impacts such as meteors, falling airplane parts or objects thrown from cars.|
|Malicious damage||Vandalism and deliberate property damage caused by someone who does not live at the address.|
|Escape of liquid||Possessions damaged by most types of leaks.|
|Smoke||Smoke damage to possessions that are damaged by smoke, but not burnt in a house fire.|
|Flood||Belongings damaged or destroyed by an area flooding. Does not cover leaks.|
|Accidental damage||Accidental damage caused by you to the landlord’s building and/or your contents.|
|Possessions outside the home||Includes options to cover possessions stored outside, such as garden furniture; contents damaged in transit, for example while moving house; and items typically carried around.|
|Electric motors||Electric motor burnout of appliances in some circumstances. Generally excludes certain types of power surges such as those caused by lightning strikes.|
|Temporary accommodation||The cost of temporary accommodation if you’re unable to live at the property.|
|Liability||Legal and medical fees incurred by a visitor injuring themselves at your address.|
What should I look for in a policy?
You should consider three main things when deciding what cover you need:
- A policy that covers your risks. Choose a renters insurance policy that gives you protection for your belongings. You don’t need cover for the building itself, that's the responsibility of your landlord. Generally you won’t need to be covered for events such as earthquakes and impact. However, if you live in a flood prone area, ensure you take out flood cover.
- Good value. Look for a balance between reasonable premiums and adequate cover. Make a list of the things you’re most worried about replacing, such as expensive jewellery or a laptop you constantly use. Then find a policy that provides a generous limit for those items, but that also offers benefits such as discounted premiums based on your home’s security features.
- The right extras. There's a wide range of optional extras for renters insurance. Liability, food spoilage and cover for bicycles and other sporting goods are popular add-ons. However, you usually pay a slightly higher premium for any additions, so make sure you select the best options for your circumstances.
What can I be covered for?
Depending on which insurer you choose, and the level of cover you purchase, there is a large choice of options:
- Credit card theft. You can be covered up to $5,000 for stolen credit cards. Some policies also offer cover for identity theft.
- Electric motor fusion. If the motor of one of your big appliances dies, this will cover replacement or service costs.
- Glass breakage. When glass that is part of your furniture, such as a china cabinet, is accidentally broken, you can claim the cost of repair.
- Liability insurance. Assistance with legal and medical costs if anyone is accidentally injured in your home.
- Lock replacement. If you lose your keys or your home is broken into, you can claim for the cost of having your locks and/or cylinders replaced.
- Outdoor items. Garden furniture and other belongings kept outside at your address can be insured.
- Perishable food. Allows you to claim the cost of food that is spoiled as a result of a blackout or due to your fridge/freezer breaking down.
- Portable belongings. Cover for items that you take with you when you leave your home, such as a smartphone or luggage.
- Removal of property. The cost of removing items that are damaged during a fire or break-in can be covered.
- Safety net cover. You can opt for a percentage in addition to the general contents sum insured, to cover any shortfall in replacement cost.
- Temporary accommodation. If a house fire or other insured event prevents you from being able to live in your home, you can claim the cost of alternative accommodation.
- Transit cover. Your belongings can be covered during the process of moving to a new address.
- Vet costs. If your dog or cat is injured in an accident, you can claim for part of the treatment.
- Visitors’ property. This covers the belongings of people such as guests and domestic helpers, who do not live permanently at your address.
Three traps to avoid
There are several renters insurance pitfalls to be aware of:
Trap 1: Incomplete cover
While basic fire and theft insurance can be cost-effective, it doesn’t offer complete cover for common risks. For example, floods are relatively common in some areas and can cause more damage to possessions than to the buildings they are housed in. Cover for flooding is a popular extras choice with renters looking for more comprehensive insurance. Extras such as temporary accommodation, loss of income, portable contents and liability cover are also available with some policies. Always check the limits as they can be relatively low for this type of insurance, and may not be enough for your needs.
Trap 2: Overpaying
If you have comprehensive renters insurance but really only need fire and theft, you can get better value from a basic fire and theft policy. Premiums usually increase over time, so it’s a good idea to compare policies regularly. If you think your premiums are too high, shop around for similar options from other providers.
Trap 3: Not updating your policy
If you don't inform your insurance company when your circumstances change, you could find you’re not covered for some losses. When you take out cover, be aware of what is required if you move house. Also consider updating your cover before you move house to include items such as belongings in transit.
How does renters insurance work?
The first step is to obtain a suitable tenants insurance policy, and to do that you need to work out what items you want insured. Use a contents calculator to estimate the total sum insured you will need, and obtain independent valuations for expensive items such as jewellery or antiques. Think about whether you are likely to need liability cover and what optional extras you would benefit from.
Once you have purchased your policy, make a detailed inventory of all your assets. Keep a record of serial numbers, scan your receipts, take photos, and file any valuations you have.
If you need to make a claim, you contact your insurer with details of your policy, as well as a list of items that have been damaged, destroyed or stolen. Your inventory will be a crucial way of verifying your losses. If you’ve been the victim of vandalism or burglary, you will need to provide the number of the police report.
Is renters insurance worth taking out?
In 2014, it was reported that 75% of Australian tenants do not insure the contents of their home. The same study revealed that burglaries are twice as common in rented properties than in homes which are owned by the occupants.*
Considering the expense of potentially replacing everything you own after a house fire, and the fact you can purchase a basic policy for less than $10 per week, renters insurance is definitely worth considering.
What are the key differences between renters and landlords insurance?
Both policies cover core events, such as fire, theft and water damage.
Renters insurance includes cover options that are tailored specifically to renters' needs, such as insurance for belongings in transit while you move from one address to another, as well as liability insurance.
|Renters insurance||Landlords insurance|
|Covers personal contents in a building.||Covers the building structure itself.|
|Cover for temporary accommodation if an insured event makes your residence impossible to live in.||Cover for loss of rental income.|
|Cover for extra living expenses while your home is being repaired, such as an electricity reconnection fee.||Covers you for additional costs related to rebuilding or repairing a home after an insured event, including debris removal and architect fees.|
|Cover for accidental damage to ceramic fixtures such as basins and baths.||Cover for deliberate or malicious damage caused by tenants.|
|Cover for portable items that are often taken outside the home, such as jewellery or electronics.||Cover for the cost of repairs to the home or for fixtures that are permanently attached to it (such as carpets or light fittings).|
Does renters insurance cover me for damage caused by my pets?
In the event that your landlord allows you to keep pets, it’s worth remembering that renters insurance doesn’t normally cover you for damage caused by animals kept at your property. Depending on the insurer and the level of cover you choose, you may still be insured for specific animal-related situations, such as the following:
- Damage caused by wild animals. You can be insured for damage to your belongings that is caused by an animal that makes its way into your home uninvited. This usually excludes insects, rodents and vermin.
- Accidental breakage. It is possible to find a policy that covers you for accidents such as your pet knocking over an expensive vase or other fragile object, but the most common types of damage caused by pets are still usually excluded. For example, you’re not covered for your furry friends clawing or chewing on furniture, or going to the toilet where it shouldn’t.
- Liability for animal attack. If your renters insurance includes liability cover, conditions do apply, but generally you are insured for medical costs arising from someone at your home being injured by your pet. Injuries caused by dog breeds that are listed as dangerous or restricted are not covered.
|Pet damage that can be covered||Pet damage not covered||Get quote|
|Budget Direct||Insured events caused by resident pet, except accidental damage and most impact damage.|
Impact damage caused by resident pet to glass, crystal and ceramic items, except certain items like laptop or phone screens.
|Accidental damage caused by animal pecking, chewing, clawing, biting, urination or defecation.||Get quote|