Choosing home and contents insurance

A low premium is good…right?

Although it’s understandable to want to keep a lid on expenses, Fiona Eccles, a partner at Capital Insurance Brokers in Canberra, says a common mistake many people make is to focus only on the cost of the premium.

“A cheap insurance premium is by no means a barometer of how good a home and contents policy is. In many instances a cheap premium simply means a narrower cover or a higher excess.”

“It can be tempting to agree to an excess of $2000 or $3000, but if you make more than one claim in a year, the cost really adds up and it’s a lot to have to outlay before you get any money back from your insurer.”

Don’t underinsure

Eccles says many people underestimate the value of their contents and underinsure as a result.

“What you really need to do is go from room to room in your home. Ask yourself ‘what would it cost to replace everything in this room at today’s prices?’ then write down that amount. Add it all up and you might be surprised at how high the total is, even if you’ve only ‘guesstimated’ the value of some of your possessions.”

Eccles says clothing, footwear and artwork are items people often forget to account for when deciding how much to insure their home contents for.

“Think about everything in your wardrobe. For many people, their clothing alone would cost many thousands of dollars to replace.”

“Moreover, if you underinsure your home or contents, you may be only be entitled to a proportion of the cost of repairs/replacements, which is a nasty surprise when you go to make a claim.”

To find out how much your home would really cost to rebuild, Eccles recommends using one of the many online calculators available. Find one by searching for ‘building sum insured calculator’.

Look closely at what’s included

Not all home and contents insurance policies are the same.

“Each insurer uses different wording and applies their own definitions around what the policy covers,” says Eccles.

“Accidental damage is one area where homeowners often get caught out. Check the definitions in the policy because you might find you’re only covered up to a certain sum, or only for certain accidental events, and you may get an unpleasant surprise when you put in a claim.”

“Exclusions are another area to watch. Some contents are excluded from policies based on their dimensions, features or usage and you need to check that the items you want covered aren’t excluded within the policy you purchase.”

Understand your needs

Think about your personal attitude to risk and know what you want from your insurer in the event that you make a claim, says Eccles.

“Are you expecting total replacement of your home and everything in it? Or would you be happy with a partial rebuild or a rebuild to a lower standard?”

“You can pay a lot for cover and never need it. It’s about striking a balance by weighing up your attitude to risk and your expectation of the insurance you’re purchasing.”

Consider professional advice

An insurance broker can help you navigate the home and contents insurance maze.

“Many consumers are not insurance-savvy and reading a policy puts them to sleep! When they make a claim, they may find they’re not covered for things they assumed were included.”

In particular, an insurance broker can help you make sense of the wording contained in a policy.

“We are better positioned to negotiate a more favourable wording and terms on your behalf. As we represent you, in the event that you wish to make a claim we will assist you to lodge the claim and, most importantly, negotiate the appropriate settlement with your insurers.”

Eccles says some insurers can be harder to extract claims from and a broker may also be able to advise you on which insurers have the best claims reputation.

It’s worth taking the time to consider you unique circumstances, so you can select a home and contents insurance policy that offers the protection you really need.