Home contents insurance ain’t what it used to be, in good ways and bad.
Pricing cover based on postcode is long gone, Campbell Fuller, the spokesman for Understand Insurance, tells Starts at 60. Now insurers work on your individual address, which means customers aren’t cross-subsidising each other as much as in the past. This equals lower premiums for lower-risk homes, Fuller explains.
Technology also means that claims can be made and settled online.
“This is designed to speed up processing, which means insurers can more speedily begin repairs or replace assets,” he says.
But changing Aussie lifestyles, as well as the availability of expensive tech goods items that weren’t even on the market a decade ago, increases the risk of being under-insured.
“We’re seeing a change in lifestyle habits, like people choosing to rent for longer or move around more, which means they might not have home or contents insurance to protect them if they’ve suffered a loss such as theft or fire,” a spokesperson for NRMA Insurance tells us.
As Canstar points out, under-insuring makes as much sense as insuring a Porsche at a Hyundai price.
“You might get away with it but at some stage the gap in cover is going to come back to haunt you,” the comparison site reckons.
So Starts at 60 has pulled together the latest advice on getting the most out of your contents cover.
Detail is key on contents
Consumer advocates Choice suggest going through every room in your home and working out how much it’d cost to replace each item, not leaving out anything. The cost of replacing everyday items such as crockery, cutlery, linens and even your shoes will add up if you have to buy the whole lot again.
Many insurers, as well the Insurance Council of Australia, have contents insurance calculators on their sites to help you work out more accurately the sum you need insured.
Once you’ve made your inventory, store a copy away from your home – perhaps with a friend or financial adviser – because it’s no use having a neat list of your valuables on your home computer if that’s one of the items that are damaged or stolen.
The Australian Securities and Investments Authority’s MoneySmart site points out that “new for old” policies that replace your goods rather than covering the valuing your goods are usually more expensive, so work out what you’d prefer. You can reduce the cost of cover by choosing a higher excess that has you cover, say, the first $500 or $1,000 of a claim.
If you choose to have the value of your goods covered rather than “new for old”, NRMA Insurance’s spokesperson recommends you then review your sum insured regularly to make sure it’s kept up with your purchases and the cost of replacing them.
It’s valuable to look at valuables
Policies often have a cap on the amount that valuables such as jewellery can be replaced at as a whole under a general contents policy, for example, $1,000 per item and up to $5,000 in total for jewellery, Choice says, so it may be worth insuring these items separately. Also consider whether you take these items out of your home, and let your insurer know if you do, as that can affect the cost of cover.
Don’t forget the great outdoors
Choice warns that some policies have restrictions on items such as electronics or bicycles that are stored in the “open air” and each insurer has its own definition of what open air is, with some considering an unlocked garden shed to be open air. These restrictions mean that you may only be able to claim a percentage of the item’s replacement value.
Some insurers let you buy extra cover to include open air items, so it’s worth checking your insurer’s definitions on items stored outside the house to make sure your goods are covered to the extent you’re comfortable with.
And think about the items that you take away from the home, even super-techy items such as drones. Understand Insurance’s Fuller says contents policies will cover portable devices, so make sure yours are covered when you use them away from your property.
Pets can be a problem
Canstar points out that not all policies cover damage done to your contents by your pets. But others will throw in pet insurance on their home or contents policies as an extension that may cost less than standalone pet insurance. Work out the risk of Fido chewing the table legs and cover yourself accordingly.
Start taking selfies
Valuables don’t just mean jewellery or pricey electronics – they can include items such as a stamp collection or memorabilia, so check with your insurer on its definition of valuables.
Having photographs of your valuables, and even better, receipts for their purchase, can make a contents claim much easier, so ensure your record-keeping is up to date. MoneySmart advises taking photos as you do your room-by-room contents calculation.
“We may ask you to provide documents that help us assess and settle your claim so it’s a good idea to keep receipts and photos of items such as jewellery and furniture to make the process quicker and easier,” NRMA Insurance’s spokesperson says. “Documents can also be used to help us identify correct replacements for you.”
Photos become even more important when it comes to heirloom items such as grandma’s engagement ring, which you’re unlikely to have a receipt for and would be near-impossible to replace like-for-like. Even a photograph of you wearing the item is better than no photograph at all.
How often do you holiday?
Canstar says that leaving your home vacant for an extended period of time – for most insurers, this means for more than six weeks – runs the risk of voiding your cover. Check with your insurer on its maximum term of vacancy as you may need extra cover if you leave your home for long periods for work or vacation.
Low-cost options are out there
MoneySmart points out that it’s especially important to insure your goods if you’re on a low or fixed income and wouldn’t have the ready cash to replace them.
There are insurance options even for people who feel priced out of the market, the ASIC site says.
Good Shepherd Microfinance has worked with insurers to create affordable policies that can insure only items of high value or even single items such as your fridge or television. These policies offer flexible payment options, including the option of having your premium deducted from government benefits payments. More information is available at the Good Shepherd Microfinance site.
Claims settlements aren’t all the same
Insurers often multiple ways to settle contents claims, with some offering to repair rather than replace goods, give you a lump sum or even gift cards so you can choose your own replacements.
Make sure you’re happy with the settlement options offered on your policy and if you choose gift cards, don’t forget that these usually have a strict expiry date and may only be applicable to selected stores.