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| Home
and Contents Insurance Guide |
Protection
for your most valuable assets.
Choosing your insurance
 Leaving
your home and its contents unprotected against theft and damage is
a very risky prospect one small accident and your biggest asset could
go up in smoke.
However, many Australians are still prepared to take that risk, and
a large percentage of homes around the country remain uninsured or
underinsured.
When you take out home and contents insurance, you essentially pay
an insurance company a specified sum to take responsibility for your
risk. But which policy should you choose? This guide outlines some
of the major issues associated with home and contents insurance.
Choosing your insurance
The home and contents insurance market is highly competitive and there's
a wide variety of products out there competing for your dollar. But
how do you know which one is right for you? And what should you be
aware of when you are purchasing insurance?
Choosing a policy
There are a number of questions that you need to ask yourself when
you are choosing a home and contents insurance policy.
1. What events are covered under the policy?
No matter what policy you choose, you will only ever be covered for
events that are clearly indicated in your policy document. However,
different types of policies provide a different level of cover.
Accidental loss or damage policies are very broad, covering all loss
and damage with a minimal number of exclusions. Generally, the broader
the policy, the more expensive it will be.
Defined events policies, on the other hand, only cover a specific
list of events which are set out in detail in the contract, such as
earthquakes, fires, theft and some types of water damage. It is essential
that you understand exactly what is and is not covered common exclusions
include flooding, subsidence, some types of storm damage and the effects
of tree roots, as well as tidal waves and acts of terrorism.
2. Which items are covered by the policy?
Home and contents insurance does not always come in a related package
you can opt to take out insurance on your house but not your contents,
and vice versa. In relation to contents, there may be limits on the
amount you can claim for a specific item. For instance, there is usually
a maximum amount that can be claimed for a CD collection, or a particular
piece of jewellery. You can insure these particular items for their
full worth by paying a larger premium or taking out a separate insurance
policy.
If you fail to keep your home and contents in good repair, your insurer
may not pay you the full amount if you have to make a claim.
3. Is depreciation an issue?
Most insurance policies these days provide replacement and reinstatement
cover, which means that all damaged or lost items are replaced 'new
for old', regardless of their age. However, there are still a few
insurance policies that replace items at their depreciated value this
is known as indemnity cover. Both types of policies may place age
limits on replacing items with limited life spans, such as refrigerators.
4. What level of excess do you need?
Excess is the money you contribute towards any claim you make on your
insurance policy. This fixed amount should be clearly stated in your
contract. Generally, you can set your level of excess, and this level
directly affects your insurance premium. If you are willing to pay
a large amount of excess in the case of a claim, you will pay less
money initially. Conversely, if you do not want to pay excess at all,
you will pay more up front. It's all about risk the more you are willing
to expose yourself, the less you pay in the short term.
The process of buying insurance
When you decide on the policy that best suits you, the insurer will
ask you to provide them with a variety of details. This will include
information such as the location of your home, the type of security
you have installed and, if you have a mortgage, the details of your
lender.
It will also ask you for more personal details, such as your age,
insurance history and whether or not you have any criminal convictions
relating to fraud or malicious damage. If you have such a criminal
record most insurance companies will not allow you to take out a policy.
It is essential that you answer these questions accurately you have
what is called a 'duty of disclosure'. The insurer does not generally
confirm your details at the time that you take out the policy. Rather,
it checks them when you make a claim, and if it finds that you have
provided inaccurate information, it can reduce the claim or refuse
it altogether.
The cost of your policy will be determined by a variety of factors,
including your age, your insurance history, the location of your house,
the excess you have chosen, the sum for which you have insured your
home and contents, and any optional covers on specific valuable items.
There are various discounts available on the cost of insurance. If
you have several policies with the same company (for instance, car
insurance and life insurance as well as home and contents insurance)
or you have held a policy with a single company for a number of consecutive
years you may receive a significant reduction in premium. Additionally,
if you have never made a claim on your insurance, you will usually
be eligible for a no claims bonus on your yearly premium.
After you have paid your premium you receive a certificate of insurance
and a general policy document, which should clearly explain what is
and is not included in your policy. Make sure you read this document
carefully if there is anything you do not understand, consult your
insurance company for clarification.
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The value of your home
and contents |
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