When you’re looking to insure your home, it’s not just damage to the physical property you’ll have to worry about. Leaving yourself unprotected against the loss of or damage to your belongings can set you back a significant amount, particularly if they’re vital to replace. This is where a contents insurance policy comes in handy. Find out all there is to know about contents insurance and why it’ll be the right move for you in this comprehensive guide
How does a contents insurance policy work?
Put simply, contents insurance provides coverage for damage to or loss of your belongings. These can vary in type and value significantly, depending on what sentimental value you place on your items and which ones you’re looking to insure. Contents insurance policies are most commonly combined with home insurance policies to form a home and contents insurance policy, which are the most comprehensive type of property insurance in terms of their coverage.
There are two main types of contents that are covered under your policy: household items and personal effects. The former tend to remain within the confines of your home, while the latter are generally more portable and can be taken around with you outside.
Common household items that are covered by your contents insurance policy can include:
- Electrical items and appliances: this can be anything from living area features like televisions, speakers and gaming consoles to appliances such as dishwashers, washing machines and refrigerators.
- Furniture: beds, couches, cabinets tables and chairs are all covered under contents insurance.
- Permanent fixtures: anything bolted into the ceiling, wall or ground essentially, such as baths and showers, air conditioning systems, gates and toilets.
- Fittings: these are non-fixed items like curtains, carpets, pot plants, ornaments and works of art like paintings.
- Tools: this encompasses both electrical and non-electrical tools, as well as other equipment typically kept in a shed for the purposes of fixing or gardening.
Personal effects cover may not always automatically be included in your contents insurance policy, so you might have to buy it as an optional extra. Some of the personal effects you’re likely to be able to cover include:
- Jewellery: a common valuable, items such as rings, earrings, bracelets and necklaces can all be covered under either contents insurance or a portable contents insurance optional extra.
- Clothing: contents insurance will come in handy if some of your more expensive items, such as suits, dresses, jackets and shoes are damaged or lost.
- Sports equipment: these are often expensive, so racquets, bats, sticks, pads and helmets can all be covered.
- Instruments: never fear if you hold your musical instrument dear, as guitars, drums, saxophones, violins and pianos can all fall under contents insurance.
- Glasses: this can be anything from seeing eye glasses to sunglasses; even contact lenses are likely to be covered.
- Toys: your kid’s toys can be covered in the (likely) event that they end up damaged in some way, shape or form, most likely through an optional extra.
- Cosmetics: makeup, lipstick, brushes and serums can all be included in your contents insurance policy.
What events am I insured for under a contents insurance policy?
When it comes to the types of damage your contents can be covered for, you’ll find that they align very closely with insured events under a home or building insurance policy. Keep your eye on some of the following to ensure that you’ll receive coverage in the event that you have to make a claim:
Depending on your insurance policy, your contents can be covered for several different types of weather event, including:
- Fire or bushfire damage, including caused by smoke, ash or soot
- Flood damage
- Storm damage, including caused by hail, wind or lightning
- Earthquake damage
Not all instances of weather damage are covered by contents insurance policies, though. For example, damage caused by ocean activity will almost always be excluded from your coverage, as will smoke or soot damage caused by a fire started on a neighbouring property if it’s more than 100m away from your own. You may also find that not all of these are included in your policy, as flood cover is an example of a common optional extra to be added onto your contents insurance.
Included in most contents insurance policies also is non-flood or storm water damage, known as escaping water or escape of liquid damage. This is the classification given to water leaks or seepages occurring from pipes, drains or appliances that cause damage to your belongings. You may not always be covered for this either if the damage was caused as a result of the wear or poor condition of the escape site, which you’re responsible for maintaining.
Damage to, or loss of, your belongings due to theft will be covered under your contents insurance policy. This is where you can see differences between insurers regarding how they elect to cover your valuables. Total replacement cover will replace or repair your item if lost or damaged beyond repair with a new or equivalent item to the condition of the original. Sum insured cover, on the other hand, will see you and your insurer agree on a figure to be paid out in advance of any damage or loss taking place. Customers have to be wary of sum insured cover, as you can underinsure yourself if your estimates on the value of your items is inaccurate. However, premiums are typically less expensive for sum insured cover policies.
Intentional third-party damage
The damage done to your contents doesn’t have to be theft-related to be covered by your contents insurance policy. Every good contents insurance policy will cover damage done intentionally and maliciously to your valuables or other belongings. This will usually apply to perpetrators not living on your property, so you may not be covered if your kid breaks your favourite necklace. However, if you’re a property investor, you can take out landlord contents insurance to cover damage done to your furnished property by your tenants, rather than exclusively non-residents.
Impact damage is caused by an external force colliding with your belongings. For example, if a tree falls and smashes your barbeque, you’ll probably be covered for its replacement. Other instances of impact damage can include vehicles and falling light or telephone poles.
What are some of the optional extras I should look for on my contents insurance policy?
There are several optional extras you should consider adding onto your contents insurance policy. This is because policies in their most basic form are likely to leave noticeable gaps in their coverage, primarily sticking to the areas listed above. Not all insurers are the same when it comes to optional extras: some will include them in their main policy coverage, while others won’t offer any sort of coverage. Take a look at some of the most common optional extras to see if you might want to pursue them.
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Accidental damage cover
We’re all human, and sometimes accidents happen. You’ll probably find that there will be accident cover in some form in your contents insurance policy, but it’s unlikely to be substantial. With accidental damage cover, you can add a further layer of protection to your belongings both against yourself and your guests. Accidental damage can include anything from glass and ceramic breakage to a red wine spill on a rug. Make sure you check with your insurer ahead of time to confirm what accidental damage you’ll be covered for.
Motor burnout cover
Motor burnout cover insures you against your appliances or other electrical items dying due to a faulty or exhausted motor. Definitions surrounding what constitutes motor burnout varies between lenders, but you won’t receive cover for an item that’s more than ten years old. Most insurers will insure against power surges or electrical currents, but it’s worth reading the fine print if it’s an area you’re looking to receive cover for.
Flood damage cover
As previously mentioned, flood cover isn’t always included in your primary contents insurance coverage. This could be a necessary addition to your policy if you live in a coastal area which is at greater risk of flooding or are situated below or near a river or creek.
Personal effects cover
While contents insurance covers your belongings, it tends to focus on those which remain on your property (and are damaged or stolen from there). If your policy doesn’t already cover it, personal effects cover can insure you for damage to, or loss of, your valuables when outside the house. This generally applies to portable items such as jewellery or phones that wouldn’t feasibly be confined to the four walls of your home.
Commercial storage cover
You may be putting your valuables at risk of damage when you entrust them to a stranger in a removal truck, and you could be right. Adding commercial storage cover to your contents insurance policy can protect you if your items are damaged when stored in a facility of this nature, like a lockable warehouse or a vehicle carrying them
Factors which affect the cost of your contents insurance premiums
Who you are as a customer
The first thing any insurer will look at is your profile and assess the level of risk you may pose. If you have a long history of claims made on previous insurance policies, you’re more likely to be deemed a riskier proposition for your insurer to take on. However, if you’ve continually avoided making claims over several years, you’ll probably receive a no claims discount (NCD) as a reward for your safety that can slash the cost of your premiums.
Top tips to avoid being underinsured for your contents insurance policy
Whenever you buy a new item that you’d like to have insured, contact your insurer and let them know you have it. There’s nothing worse than having your brand-new television stolen before you get the chance to insure it, as you’ll be left with nothing.
Take some time to think over how much replacing your valuables will actually be worth. Taking a rough stab in the dark and landing on a figure is unlikely to work for you. A conservative estimate on the value of one of your more expensive belongings could end up leaving your wallet hundreds of dollars lighter if it’s short of the mark, so be careful.
Contents insurance policies will usually have a clearly defined cap for the most money they can pay out for a particular item. You should be acutely aware of these, as they could have a significant impact if one of your belongings needs replacing. To use the example above, if your $2,500 television is stolen or broken and the maximum your insurer is willing to pay for items of that nature is $1,500, you’d $1,000 out of pocket to replace it.