Contents Insurance
Contents insurance, covers your possessions against events such as theft, damage, fire and earthquakes. In addition, it will normally provide you with legal liability.
Like any insurance product, there’s some things you need to understand and common exclusions people may not be aware of.
Read on to make sure you understand exactly what you’re covered for!
Legal Liability:
Under current laws, if you damage your rental property (fire, careless damage etc), you can be liable for either the Landlords’ insurance excess, or 4 weeks rent.
Legal liability will cover you for this, in addition in the unlikely event you caused a fire which spread to other houses, insurance will cover you. Otherwise you could be liable for the full cost of damage to a neighbour’s house!
As well as the big things, it also covers your legal liability for damage to other people’s contents. Accidentally knock someone’s phone out of their hand and it smashes? You’ll be glad to have contents insurance!
Good to know:
As with all insurance products, there are differences in the type of cover you can get, with substantial differences in pricing and coverage between companies. It is important as always to ensure you are totally honest with your insurer, otherwise you risk a claim being denied.
When you choose a policy, you will need to put down a total value of your contents. There’s no point going for a much larger figure, as you will pay more, and will only be paid out what you can prove you own.
Conversely if you underestimate the value, in the event of a total loss (house fire for example), you may not be covered for everything you own.
When it comes time to claim, you will need evidence to prove you owned the items you are claiming for. A good idea is to take a video, or photos of all your contents, and of any receipts you can find.
Put copies of this on the cloud (Google Drive, Dropbox or even email them to yourself). At the same time this will give you an idea of what you need covered, so you can estimate a total value for the items you own.
It is also vital to understand what’s covered and isn’t, so check out our guide here to understand common exclusions.
Excess:
This can be a bit dependent on what you are insuring. If you primarily care about some high value items (maybe $1000 plus) then you may be able to save some money going for a higher excess.
The problem with a high excess is it is often not worth claiming on items worth a few hundred dollars. If your $500 camera is stolen, it will likely not be worth claiming for at all.
For most people a lower excess is a better option, but it should be compared to the annual premium cost.
Item Limits:
All policies tend to have standard limitations on the value of one item. It’s important to check these, as if you have any valuable items, they may be over these limits.
For example, most bikes are limited to between $2,000 and $5,000. If you have a nice mountain bike worth more, then the most you will get paid is the limit ($2,000 to $5,000 depending on the policy), even if it’s worth $10,000.
The good news is with most policies you can specify certain items and have them covered, but you must do this at the beginning.
New for old vs market value:
Most policies will be either new for old, or market value cover. Typically, it doesn’t cost much more for new for old policies in comparison to market value. New for old means you will also receive a replacement of the product (sometimes a more modern version), as opposed to what the insurance company values your product as a 2nd hand item. Your $1500 TV would be replaced with a similar value item with new for old, but under market value if they think it’s worth $600, you’ll get that minus your excess – So maybe a $400 cash pay-out instead of a brand-new TV.
In addition, some new for old policies still have certain items only covered at market value. These typically include:
- Clothing/Footwear
- Bicycles
- Sporting Equipment
Alternatively they may have age limitations. Some items may not be covered for replacement value once they have reached a certain age. Common examples are:
- Computers/tablets
- Furniture
- Curtains etc
- Home Appliances
Accidental Damage:
Not just for when you accidentally drop your phone and need a replacement. Basically, it covers you for all situations where it can be argued you were responsible for damaging an object of yours.
Personally, I’ve had 2 claims for TVs under this, once my TV was knocked off the stand by a curtain in a gust of wind. A second time I had it in the boot of my car (carefully wrapped) but upon arrival saw the screen was cracked.
This is typically always worthwhile having and provides peace of mind – Accidents happen.