A quick guide to contents insurance

A quick guide to contents insurance

You definitely can’t put a price on the sentimental value of your belongings - but you can insure them if they get stolen or damaged.

A recent survey from the Insurance Council of Australia found that 74% of renters don’t have contents insurance while more than 80% of homeowners and renters are under-insured.

If you don’t think you’d be able to afford to replace all your belongings out of your own pocket if something were to happen to them, it may be worth taking out contents insurance.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

What is contents insurance?

No prizes for guessing: contents insurance covers the contents of your home if something bad happens to them such as theft, damage or loss. Contents insurance can cover everything from your furniture and whitegoods to your computer, clothes, homewares and extensive collection of Troll Dolls (no judgement…)

Contents insurance is different to home insurance because it only covers the items inside your house, not the actual house itself.

It’s important to know that contents insurance usually doesn’t provide coverage for your portable items (like your phone or laptop) if it gets stolen or damaged when it’s away from your home. If you want to make sure your valuable portable belongings are insured when you’re out and about, you’ll usually need to take out extra cover, though some insurers do include portable items in policies.

Types of contents insurance

There are two types of contents insurance: replacement value and ‘new for old’.

Replacement value

A replacement value policy only provides coverage for how much your belongings were worth at the time they were stolen or damaged. Because the value of your items depreciates over time, the insurer will only pay out what that item is worth at the time of the incident. As you can probably imagine, this can mean the money you receive from the insurer isn’t always enough to buy a brand new replacement of that item.

However, replacement value policies usually work out to be cheaper because the amount of cover they provide drops over time as the value of your belongings depreciates.

New for old

Unlike replacement value policies, new for old policies cover your belongings for the full cost of replacing them with their brand new equivalent. So if the $300 TV you bought from Aldi gets stolen, don’t push your luck by expecting it to be replaced with a $10,000 Samsung one.

Insurance premiums on new for old insurance policies are often more expensive than replacement value policies.

What does contents insurance cover?

The minimum amount of cover in many contents insurance policies is known as a ‘defined events’ policy and will cover your belongings if something happens to them in the event of a burglary, fire, storm or general damage.

If you want a higher level of coverage, an ‘accidental damage’ policy will give you coverage if your belongings are damaged accidentally, such as spilling red wine all over your favourite white rug or accidentally knocking over your TV.

If you have valuable items, such as rare artwork or very expensive jewellery, you should list these items separately on your contents insurance policy so that you can insure them for their full amount, otherwise they could be excluded if you ever need to make a claim. The same applies if you have a collection, like rare coins no longer in circulation. This will make your insurance policy more expensive, but it’s probably worth it if you own such valuable items.

As we briefly mentioned before, some contents insurance policies don’t provide coverage for portable items if something happens to them when they’re outside your home. It’s worth checking with your insurer as some premium policies include coverage for portable items as a standard while for others it’s an optional extra. Portable contents insurance covers items when you’re out and about anywhere in Australia and some policies also include New Zealand. If you’re overseas, you’ll generally be covered for the first 30 days of your trip.

What isn’t covered by contents insurance?

Depending on your policy, there can be a range of exclusions that apply which may include:

  • Intentional acts of damage committed by you, guests or tenants

  • General wear and tear

  • Animal damage

  • Theft that occurs if the home isn’t properly secured

  • Items obtained illegally

  • Items that just go missing (not stolen)

  • Any damage that occurs because of a war or riots

It’s important to note this isn’t a full list of exclusions and exclusions will differ depending on the insurer.

Should you take out contents insurance if you’re renting or live in a share house?

Because you’re only renting, you don’t need to worry about taking out home insurance - that’s up to the landlord. But if you want to be insured for the cost of replacing your belongings, then it may be worth taking out contents insurance (sometimes called renters contents insurance or renters insurance).

If you live with housemates and want to take out contents insurance, you generally can’t insure certain rooms of the house (like only your bedroom) so you’ll have to take out contents insurance for the entire house. But if your housemates aren’t willing to chip in and help pay, you can exclude their belongings when itemising the contents of your home and only list your stuff.

Many insurers also won’t provide contents insurance for a share house if there are three or more unrelated people living there.

Remember that contents insurance won’t cover you if something happens to your items and the home isn’t properly secured, so if one of your housemates forgets to lock the front door and someone comes in and steals all your stuff, you’re out of luck. The same goes if a vengeful housemate decides to take out their anger on you by stealing or damaging your belongings, or if your housemate has an untrustworthy mate who comes over and nicks your PS5.

How to save on contents insurance

You shouldn’t skimp too much when it comes to contents insurance, but there are ways to save money and still be adequately covered.

Secure your home

Many contents insurance policies won’t provide coverage if something happens to your belongings if your house isn’t secured properly, and less secure homes can be more expensive to insure. Bring down this cost by installing security systems, deadbolts, sensor lights, and alarms. Homes with carports are usually considered to be less secure than homes with lockable garages, so it’s important to take this into consideration when taking out contents insurance (and car insurance for that matter).

Combine policies

Rather than having a separate home insurance policy and contents insurance policy, combining the two (home and contents insurance) often works out to be cheaper.

Shop around

Don’t just settle on the first contents insurance policy you find on Google - like with any financial product it pays to shop around and compare.

Choose a higher excess

Choosing a higher excess means that your premium will be lower - just be prepared to pay a higher excess if you make a claim.

Savings.com.au’s two cents

You could certainly take the risk and not insure your belongings, but it’s worth taking a few minutes and calculating how much your belongings cost - and if you could afford to replace them out of your own pocket if something were to happen.

If the answer is no, it may be worth taking out contents insurance.


Photo by Yehleen gaffney on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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