20 Dec, 2019
Chances are, your home is the most important thing you’ll ever own – not to mention, the most expensive! You spend years saving up for it, jumping through all the administrative hoops, securing a home loan and choosing the perfect one. So, once you’ve moved in, protecting your home – and the cherished belongings inside it – should be of paramount importance. But alarmingly, research from Mozo shows that up to 66% of Australian properties are underinsured when it comes to home and contents insurance.
The bushfires that ravaged our country in 2019 truly highlighted the importance of having adequate home and contents insurance. With more than 500 homes destroyed across the nation, many of these homeowners will be left out of pocket as they start to rebuild. As global warming continues to create unpredictable weather conditions in the new decade and beyond, now is the perfect time to make sure your home is adequately protected. But how do you pick the best home and contents insurance in Australia, and how much will it cost you? And do renters need home and contents insurance too, or is it only for homeowners?
Here, we’ve put together a handy guide to everything you need to know about home and contents insurance.
Related Text: What are the costs involved in buying a home?
You may be wondering ‘why do I need home and contents insurance?’ After all, it might seem like just another expense on top of all your other bills. However, the cost of having to replace or rebuild your property in an emergency is far greater than any premiums you’d pay for insurance – so it’s often just not worth the risk.
When you’re properly insured, it allows you to gain quick access to the funds needed to rebuild or repair your home and replace your belongings – so you can get safely and comfortably back into your home sooner.
While protecting one’s property and belongings is one reason many Australians get home and contents insurance, it’s not the only reason. Many lenders require homeowners to purchase insurance that covers at least the cost of the property. This helps to protect them from the property losing value while you’re still paying off your mortgage.
Taking out home and contents insurance can also protect you from liability. Say, for example, a neighbour comes to your property, trips over a wire and breaks a bone – they may ask you to foot their medical bill. Having home and contents insurance will help you to cover some of this cost so you’re not left in the lurch.
The exact amount you will be covered for depends on a number of factors, including your provider, the type of insurance and your individual circumstances. The different types of insurance include:
With these policies, you nominate how much your home and contents would cost to replace and they will pay claims up to that amount specified on your insurance policy.
These policies will pay a predetermined percentage of up to 30% above the sum insured amount.
Applying only to building cover, this type of policy will pay whatever it costs to repair or rebuild your property.
When it comes to calculating how much home and contents insurance cover you need, it’s best to start with figuring out how much your home would cost to repair. There are a couple of ways you can calculate this, including:
There are many things many basic contents insurance packages don’t automatically cover. These include:
It’s worth being aware that there are also some circumstances that your home and contents insurance isn’t covered, such as in the case of accidental damage. So, always double check with your insurer when you’re signing up.
If a valuable item such as a laptop, camera, jewellery gets stolen or damaged outside the home, most insurers will not cover this as part of your general contents insurance. Usually, you will need to add on portable contents insurance as a benefit to ensure these items are protected. Similarly, for items kept in storage, you will normally need to add on storage contents insurance.
When you pay for home and contents insurance, you’re paying for your premium, deducted on a monthly or yearly basis. The amount you pay for this premium is based largely on the likelihood that you will need to make a claim in the future – essentially, the amount of risk the insurer is prepared to take for your property. This is based on factors like the location of your home, the year it was built and construction materials used.
It’s impossible to give an exact amount of how much home and contents insurance costs, because it varies so widely. A Finder study analysed eight insurers and found a difference of $1335 between the most and least expensive home insurance policies – sometimes for the exact same home! The location of the property (and the weather conditions that exist there) is a huge factor in determining how much you’ll pay. Canstar’s 2017 Home and Contents Insurance Rating Report analysed the average premiums from state to state, based on a home and contents insurance of $575,000 combined with a $500 excess. They found that the average maximum yearly price for a home and contents insurance policy in Queensland (where tropical storms are frequent) was a whopping $5,270, compared to $2,116 in NSW or $1907 in Victoria.
Many insurance providers allow you to add on additional benefits if they’re not already covered by your policy. These include things like accidental damage, storage content insurance, portable contents insurance or domestic workers compensation. These come at an extra cost, so it’s important to carefully consider your lifestyle when deciding whether to add them on. For example, if you have young children, accidental damage cover might be a priority in case someone throws a ball through a window! Or, if you are renovating your home and will have contractors in your home, domestic workers compensation ensures you’re protected if they get injured on site.
The cheapest home and contents insurance isn’t always considered the best option. After all, you want to make sure you’re adequately covered should you need to make a claim. Otherwise, it will just end up costing you far more in the long run. However, there are a few ways to secure a better deal and get more bang for your buck.
Australia’s insurance market is competitive, so in order to entice customers to sign up or stay, many providers offer multi-policy discounts. This is where you have multiple insurance products with the same company (for example, home and contents, as well as car, boat and sometimes health insurance) and as a result, get discounts applied to each product. Taking advantage of these bundle discounts can lead to significant savings.
If you’ve taken measures to increase the safety and security of your home (for example, smoke alarms, deadlocks and security cameras), you should be able to pay lower premiums for your home and contents insurance. The same goes for cyclone-proofing or fire-proofing your home in areas where there is a high risk of these weather conditions. Be sure to let your insurance provider know which safety features you have in the home and you may score yourself a better deal.
Have you been with the same home and contents insurance provider for multiple years? You may be eligible for rewards for being a loyal customer – especially if you haven’t made many claims. While some providers do apply these discounts automatically, it’s always worth asking what’s available, as it can usually slash at least 5-10% off your premiums.
Most insurance providers frequently change up their deals and offerings, especially with the ever-changing weather conditions in Australia. So, to save yourself some money, it’s important to keep your eyes and ears open for a better offer. This applies to not only when you are first looking for insurance, but also when the time of year comes around to pay your renewal.
So, what happens when you find your area facing unforeseen circumstances you’re not covered for, such as extreme flooding or bushfires? Is it too late to change your cover? With most insurance providers, you can make changes to your existing policy through your online account or over the phone at any time. This includes add-on cover and changing your excess, as well as updating your list of contents. Some insurers will also let you add on the supplementary cover after the fact if you have a sum insured policy. However, it’s important to review your Product Disclosure Statement (PDS) to check what your insurer’s stance is on this.
Generally, you can make a home and contents claim with your insurer over the phone or online, using their website. Some insurance companies even have mobile apps, to make it easy to upload photos of the damage straight from your smartphone. In the instance that you do need to be a claim, it’s best to contact them immediately and provide as many details as possible about the incident and damage. If possible, you should also supply images as evidence. This will help your claim be processed as quickly and smoothly as possible.
Home and contents insurance isn’t just for people who own their own property. Here’s what you need to know about protecting yourself and your current digs if you’re renting.
Homebuilding insurance is designed specifically for homeowners, to cover the cost of rebuilding or repairing their property. So, this isn’t necessary for renters. However, contents insurance is still equally important for people who rent, to ensure that belongings such as clothes, furniture and electronics are covered if disaster strikes. Many tenants opt for renters insurance, which is more specifically tailored to their needs.
Renters insurance is a type of contents insurance that not only safeguards against the loss of personal belongings in the home, but helps protect renters from liability. While the actual building should be covered under your landlord’s home insurance, having renters insurance is helpful for a number of reasons. Firstly, if accidental damage happens in your home and you’re at fault (for example, you accidentally leave an oven on and it causes a fire) it can help protect you from liability. Or, if your rental property is damaged as a result of a natural disaster and you’re forced to live elsewhere, renter insurance can help cover the cost of alternative accommodation or expenses.
At the end of the day, safe is always better than sorry. In the unfortunate event that you ever have to make a claim, you’ll thank your past self for taking the initiative and being prepared. By referencing eChoice’s handy guide, you can begin your search for a home and contents insurance that perfectly fits your individual needs, property and lifestyle.
Words by Emma Norris
Looking for your first home loan? eChoice brokers have access to 100s of home loan products from over 25 lenders. Give us a call today.
An eChoice home loan expert will be in touch with you shortly.