Best Home and Contents Insurance

What's the difference between home insurance and contents insurance?

There are three main types of home insurance – building insurance which covers damage to building fixtures, contents insurance which covers your personal belongings and a combination of home and contents insurance which covers both. For homeowners who require both, it is usually cheaper to combine the policies and buy them as a bundle rather than separately, otherwise, you might end up paying two excesses for the same claim.

An excess is how much of the cost you will cover before the insurance company pays the rest. For instance, an excess of $100 will mean you will cover the first $100 of damage and the insurance company will cover the rest.

Home insurance

Home insurance covers physical structures and buildings in your home, including but not limited to, garages, carports, outbuildings, gates and fences. This also includes any permanently attached fixtures like solar panels, walls, ceilings, and floor coverings for loss or damage caused by a range of insured events.

Contents insurance

Contents insurance can provide compensation for the loss of or damage to items in your home caused by insured events. These items include things like furniture, furnishings, clothing, unfixed electrical goods, jewellery, sporting equipment and appliances.

Types of content insurance

Content insurance is broken down into two main policy categories: policies that compensate for the value of your belongings and another type that replaces your possessions with new items - this is called new-for-old. This type of insurance is typically more expensive than the previous kind.

Value of your belongings

Some contents insurance policies will only cover the current value of your belongings, which naturally tend to depreciate over time. This means that the compensation you receive from your insurer in the event of a claim may not cover the cost of replacing your furnishings and you will have to pay the difference out of pocket.

New-for-old

On the flip side, a new-for-old policy will mean that your insurer covers the entire cost of replacing your damaged items with new items - even if they are retailing at a higher price now than they did originally. Naturally, the premium you pay for this insurance is higher than the other option.

Individual items

You can add certain valuable items to your insurance for an additional premium. This can cover items that can be used outside the home such as jewellery, sports equipment or camera, laptops and mobile phones. Unlike the normal plan, these items can be insured for accidental damages and loss.

Furthermore, this is a good option for when the item's replacement cost goes above the general limit on most plans. For example, an engagement ring or an invaluable piece of art may be worth more than the maximum insurance coverage on basic plans which means an individual content insurance plan may be the way to go.

What does home insurance cover and not cover?

Each insurance company is different, therefore you should always read the terms and conditions in the Product Disclosure Statement (PDS) carefully to avoid any misunderstandings and to get an outline of what the insurance covers. Included should also be details of any excess you may have to pay in the event of a claim.

While tempting to skip, it's extremely useful to read the PDS in detail before signing up for any insurance policy since it'll outline any exclusions that come with a chosen level of coverage. This will save you any nasty surprises later down the road.

You can get different levels of coverage plans from the same insurer. A basic 'defined events' policy will only cover your belongings damaged or lost through specific events.

Generally, insurable events include things such as:

• Fire
• Theft
• Storm
• Earthquake
• Explosion
• Impact damage (such as from a car or a falling tree)
• Escape of water (such as from a burst pipe)
• Vandalism and riot

Broader coverage plans can also accommodate for accidental damage or let you insure items that can be taken out of the home such as cameras, jewellery or sporting equipment.

Keep in mind that many home insurance policies come with exclusions as they may not cover intentional damage or loss, damage caused by vermin or blemishes due to general wear and tear. Contents insurance may not be valid for loss of property via theft if the house was not properly secured or if the thief was let into the property.

Since every home and its contents will be valued differently, you'll have to enter your specific details in order to get a quote. However, some companies, like Australian Seniors, provide a base Essential and Top Cover option regardless of specificities.

Landlord insurance

On top of house insurance, there is such a thing as landlord insurance that covers potential damage to your property by tenants or covers the cost of rent in the case that your house becomes uninhabitable due to an insured event.

Renters insurance

Those renting in a shared house can choose to buy a policy with their housemates as long as all of their names are on the policy. Choosing a policy with a higher excess and paying annually instead of monthly will lower the cost of the overall premium.

Is it worth getting home and contents insurance?

The age-old question remains: is getting home and contents insurance actually worth it? That answer depends on numerous factors such as how much you've invested into your property and contents and if you live in a high-risk area.

Even if we feel that our house is unlikely to get damaged or broken into, life is unpredictable and it's always a good idea to think about how best to financially deal in the worst-case scenarios. Getting basic coverage is advisable for every homeowner so you are not left stranded with no house or possessions in the case of an insured event or natural disaster.

In terms of forking out money for extra coverage and lower excess costs, that depends on how smoothly you want your claims process to go in the event of a claim. What you are essentially paying for is peace of mind that in the case that things do go wrong, you will be financially covered and the process will be efficient.

Here are some things you could consider when choosing an insurance policy for you:

Value of your home

How much is your contents or house worth? Would you be able to cover the cost of repairs yourself in case things do go wrong? If you feel that you don't have a ton of valuables and live in a safe area, then it could be more cost-efficient to choose a plan with a high excess and low premium rate.

Vulnerability of your home

Do you live in a bushfire-prone area or somewhere with a higher crime rate? In this case, you might want to consider choosing a more comprehensive policy that will provide more security and a better return on investment in the long run.

Accidents do happen, and even though they're difficult to predict, having an existing home and contents insurance policy could save you a lot of future stress and money. Essentially, insurance policies are safety nets, and with the wide varieties of policies available, you can always pick a level of coverage that best suits your budget.

Factors to consider when buying home and contents insurance

Value for money

It could be useful to compare the different policies and quotes available to see which policy provides the best value for money for your specific needs. You can also read reviews to see how people rate a particular insurance company in this category.

Transparency

Another key factor you can scope out by reading trusted reviews is the transparency of your intended home insurance's policies.

Some companies may add sneaky charges or disclude common insured events in their PDS, preventing you from claiming the insurance when you need it.

Remember to read the policies carefully and speak to a representative for extra clarification should you require it. Be mindful to check for any exclusions and maximum claim limits.

Customer service

If you need to make a claim, you'll likely already be under pressure from the loss of your property or damage to your infrastructure. The last thing you need on top of that is stressful customer service. Paying a little extra for a company with a stellar customer service reputation is likely to reward you in time and energy down the road when asking queries or dealing with claims.

Claim resolution time

The claims resolution time is an important factor that contributes to overall customer satisfaction.

After a crisis, dealing with a company with a very slow resolution time can be frustrating and redundant. Read up on some reviews to see how long others had to wait for their compensation to come through. Some companies offer temporary living arrangements until they are able to fix your house as part of their policy.

Claim approval rate

The best way to find out whether an insurance company usually approves most of its claims is to read reviews. If a company consistently doesn't pay policyholders for claims when they should be according to the PDS, then it's likely to crop up in the reviews. This is valuable information that you won't see on their official websites or leaflets.

You can read reviews on the best home and contents insurance companies in the market today by scrolling up.