All You Need To Know About Home And Content Insurance

Over time, you and everyone in your family will develop an attachment to the home you’ve lived in and the things you’ve kept in it. But when a disaster like fire strikes, your home and belongings will be reduced to rubble instantly. You and your family will be left wondering how you’ll get back to life as it was. That’s where Home and Contents Insurance comes in.

In this article, you will have a comprehensive overview of what you need to know about home and content insurances in Australia.  

One Minute Overview

1. What is Home and Content Insurance

It is a collective policy which protects the house you live in and everything in it. It combines two separate insurance policies into one: home insurance and contents insurance.

• Home insurance shields you from loss or damage caused on your house by defined events. The ‘events’ are listed down in the certificate of insurance.

This policy is also called house insurance, home-owners insurance, building insurance, or property insurance. It covers the main components of a house such as walls, roofs, and windows. It also covers attachments like doors, plumbing, and fittings (kitchen cabinets & wardrobes).

Think of this as everything that would NOT fall off if you took your whole house in your hand and shook it thoroughly.

• Contents insurance protects all your belongings within the house like furniture, electronics, and clothes- basically the ‘contents’ of your home. It also safeguards the possessions of family members living with you.

It does not cover things friends or visitors leave in your house. It also does not cover the building itself.

Think of this as everything that would fall off if you took your house in your hand and shook it.

Usually, insurers merge the home insurance policy and contents insurance to market one single policy- home and contents insurance.

2. Why do you need Home and Contents Insurance?

Luckily, most Australia banks require you to purchase home insurance before final loan disbursement.

However, data from the Australian Bureau of Statistics (ABS) shows that almost 30% of households in Australia do not have home and contents insurance.

Apart from mandatory requirement from banks, there are many other reasons why this insurance is important to you. So that When disaster strikes, it will protect you from get the big lose financially.

• Better understand the house condition: This applicable for buying established house. Before purchasing, get some home insurance quote from different insurance companies. If the price is much higher than the neighbourhood, you will know that there might be something happened to the house before and owner must claimed something from the insurance.
• Value: Your home is the single most valuable thing that you’ll purchase in your lifetime. Should any calamity damage it, it’s highly unlikely you’ll be able to repair it without home and contents insurance. Also, the value of the contents in your home is probably more than you imagine. That’s because you’ve bought items slowly over a period of time. The cost of replacement may be overwhelming without insurance.
• Soft Landing: This insurance package is your fall-back in case you are affected by storms, fires, theft and other defined events. It cushions you from the expense of replacing your lost items or renovating your damaged house.
• Additional Possessions: As life goes on, you’ll upgrade your house through renovations and remodeling. You’ll also acquire more things which will add to the belongings you already have. An updated home & contents policy will ensure you are not underinsured.
• Replacement: A ‘new-for-old’ cover gives you the option of replacing your old items for new ones.
• Personal Possessions: An add-on for personal possessions in your policy covers items you carry out of your house like laptops and cameras.
• Renting: In case you are renting the home, your landlord’s insurance will only cover the building. You may need a content only policy to cover your possessions.
• Medical Liability: You may find yourself legally obligated to cater for medical expenses in case your neighbour gets injured in your house. Home and contents insurance ensures you won’t use your personal savings to foot the bills.

3. When to consider Home and Contents Insurance?

Before banks disburse the loan, they need to see the proof of house insurance being arranged. If you are building the house, bank will need to see the proof of house insurance before the final payment.

After signing the contract to purchase your house, it is about the time to compare the price among the insurance companies. The effective date of the insurance should be the date of settlement. This is because you become responsible for your house on that day. The policy ensures that the property is covered from damage throughout the settlement period. If you are building a new house, the effective date should be the house hand over date. Because on that date, you officially own the house.

When comparing the price, make sure that you are comparing apple to apple. Different insurance companies have different level of coverage. For example, some covers flood while some not. Some include the accident damage while some not. Different excess, building insure price will also impact the final price. Make sure that you have a list on what you need to insure for your house and compare the same items on the list.

If you are not planning to move in on day 1, maybe focus on the home insurance first. Contents insurance can always be added later once fully move in. However, some insurance companies provide a bundle discount. You may find buying both home and contents insurance could be cheaper than just buy home insurance.

In short, search & take out home & contents insurance immediately after signing the contract.

4. What Does Home and Contents Insurance Cover?

A good home and contents package covers a wide range of defined events that may cause loss or damage to your property. It also covers the financial expense of replacing or repairing your home & personal belongings. Different insurance policies may cover slightly different. In general, you will be looking at this insurance policy covering:

• Loss or ruin of your property resulting from:
  1. A direct hit by natural occurrences like lightning, storms, floods, earthquakes and wildfires. However, most insurers will avoid signing you up for cover just days after the government puts out an alert for tsunami, bushfire or hurricane.
  2. Burglary or theft necessitating replacement of your stolen items and repairing of your house.
  3. An explosion or collision caused by an unexpected event like a tree smashing into your home.
  4. Acts of vandalism when local hooligans spray-paint your home.
  5. Animal damage like your neighbour’s dog entering and destroying your home and belongings.
• Emergency renovation of your home after an abrupt disaster like bushfire. This is a big issue for many Aussie homeowners.
• Any preventive measures undertaken to protect your already damaged house from further ruin or loss by insured incidents.
• Short-term accommodation if your home is not livable due to damage caused by an insured event.
• Your liability in case an incident in your home causes damage to others or their possessions.
• Replacement or repair of items in your home like furniture, radio, television, computer, clothing and kitchen appliances. The damage must have been caused by any of the policy’s listed events.
• Items that you carry with you away from home such as your camera, wrist watch, or laptop. It covers locations all over Australia and New Zealand.

When searching for home and contents insurance, focus on your needs, what is covered and what is not covered by different insurance companies.

Here are the details of the coverage list that you can use to compare with different policies.

5. What It Does NOT Cover

Any pricey items in your home like jewellery or artworks may have to be listed specifically in the policy. You must also declare anything that you categorise as collection items such as rare coins, stamps and books. You’ll need an add-on for these high-value contents in your policy. This may drive up premiums and there may be dollar limits to claims made on expensive lost items.

Pets living in your house can be covered by your home and contents insurance. Items kept in the garden, driveway, or sheds inside your home boundary are also covered by this policy. Bikes are only covered if they are stored behind locked doors or fastened to a solid hold.

However, your home and contents insurance will NOT cover:

• Empty Home: Your insurer may deny you cover for any destruction that befalls your house and contents if you’ve been absent for a long period of time (mostly 30 to 60 days). Always inform your insurer in advance before you go on a long holiday. If you intend to leave the house unoccupied for a long time, check the Product Disclosure Statement (PDS) and ensure it will be covered.
• Non-family members: Any damage to your home or belongings caused by someone else staying in your home will not be covered. This may occur if you swap homes for holiday or sublet a room in your house.
• Undeclared Renovations: Generally, claims made on damages resulting from renovations you do on your home are not honoured. If the renovations leave open spaces, contents lost in case of burglary won’t be covered. Always tell your insurer in advance when you plan to undertake major repairs, alterations, or extensions on your property.
• Inadequate Security: Ensure your home and possessions are properly secured at all times by installing & maintaining an acceptable security system. You may be denied an insurance payout for loss or damage because you regularly leave your doors unlocked.
• Negligence: Good care is part of your insurance agreement. You’ll be expected to properly maintain your house and possessions. This is by quickly fixing anything before it becomes serious later. Your home & contents policy won’t cover loss resulting from carelessness or poor upkeep like doors and clothes eaten by rodents.
• Depreciation: Any loss incurred through normal wear and tear is not covered. Don’t expect a new TV after 15 years of using your old, worn-out set.
• Intentional Damage: Loss or damage to your home and contents resulting from deliberate actions by you or your family members is not covered. If you slam your house door or fridge door during a temper tantrum, your insurer won’t replace it if it breaks. In fact, it is considered as insurance fraud if you make a pay-out claim against intentional damage.
• Legal Action: Your insurance won’t cover you if your home and contents are seized as a matter of law by police, government or a court order.

Generally, a home and contents policy will cover you for listed events. However, you may wish to add accidental cover to insure you from unforeseen occurrences like spoilage by spilt wine or children.

Here are the details of the coverage list that you can use to compare with different policies.

6. Summary

Your home is the most valuable item you’ll purchase in your lifetime. It would be a shame you missed out on a payout because you omitted, misunderstood or misjudged something in your home and contents policy. The following is a list of all the tips and traps to look out for in policy:

Tips

1. Read and re-read your Product Disclosure Statement (PDS:) The devil is the detail. Go through your Policy Disclosure Statement with a fine tooth comb, especially the fine print.
2. Evaluate your level of cover: Evaluate your house and your need properly. Any changes to your home, like installations or renovations, will need an upgrade in your insurance cover.
3. Don’t auto-renew your policy: Instead use the renewal prompt to shop for new quotes, including one from your current insurer, and compare. You may get a discount for just installing a new security system.
4. Re-read your policy’s inclusions, exclusions and add-ons: Double check what is considered ‘included’ in your policy like:
   • Accidental damage
   • Flood damage
   • Collision damage
   • Replacement of locks in case of lost keys
5. Also take notice of available optional covers that can be bought for an additional amount like motor burn out or pet cover.
6. Natural disasters: Check with the Insurance Council of Australia to know whether your area is prone to natural disasters. Some insurers still don’t cover bushfire, storm and flood damage as part of standard home insurance, except as optional cover.
7. Reconsider your claims: Be cautious about making claims on your policy. It doesn’t matter whether the claim is big or small. Your premium will like rise by at least 10% whether your claim is $1000 or $100,000.

Traps

1. Empty Home: Insurers won’t cover loss or damage incurred if your home was unoccupied for 30 to 60 days. Inform your insurer in advance before going on extended travel.
2. Home maintenance: Insurers won’t cover loss or damage you incurred because you neglected to take proper care of your property.
3. Interpretation of water damage: Ensure you properly understand what your insurer considers water damage as this is always misinterpreted by clients. Insurers deny claims for damage caused by rain seeping through a leaking roof. Others don’t cover escaped liquid or even floods.
4. Business activities: If you work from home, insurers won’t cover your home office as this is considered as ‘business activity’.
5. Outdoor items: Some insurers don’t cover items outside your home like the barbeque in your backyard or fixtures in your garden.