17 Feb Protecting your home. What to look for when comparing policies
About the author
Jane Slack-Smith has been named one of the Top 10 Property Experts in Australia by Money Magazine, one of the Top 4 Financial Influencers by Qantas and been awarded the Australia’s Mortgage Broker of the Year twice.
It’s tempting to put price above everything else when choosing insurance for your property. However, whether you’ve just taken out a new mortgage or are hunting for a better deal, making sure you have enough of the right sort of cover is just as important. Here are the main insurance points to consider when comparing home and contents insurance policies.
Covering your home
Home insurance covers the replacement of your home building and permanent fixtures like plumbing and built-in cabinetry. The most common type is ‘sum-insured’, which will cover an amount that is specified by you when you take out the policy, should you need to repair or rebuild. Some insurers offer ‘total replacement’ cover, which covers the cost to repair or rebuild and replace anything destroyed by the event to the same standard but this is usually much more expensive and so not as popular.
Either way, to avoid being underinsured, you need to work out an accurate rebuild cost. You’ll also need to decide if you want to include extras like accommodation during rebuilding and removing debris from the site.
Most insurers have calculators on their websites. Try to find one based on ‘elemental estimating’. It collects a lot more detail about your home’s construction and location, making it more accurate than the rougher cost-per-square-metre estimates.
It’s often worthwhile checking if an insurer offers an underinsurance buffer. This is when they add up to 30% to your sum-insured amount if your property is a total loss.
Checking exclusions is vitally important, as all household insurance is based around carefully defined events. That means you need to check that a quote’s definitions, especially natural events like ‘flood’ and ‘fire’, work for your location and likely risks.
Calculating contents insurance
Most contents insurance offers the replacement value of your belongings, or ‘new for old’ cover but it is possible to find fixed value, or sum-insured policies.
With contents insurance, you need to decide what to include in your cover. You’ll also need to check if an insurer repairs or replaces the damaged items or pays you the amount it would cost to repair or replace them.
To calculate the value of your insurance, you’ll need to make a list of the belongings you want to insure and include how much the items would cost to replace today. You may need to add portable technology like tablets and laptops, specialist items like artwork or things valued above the payout limit, like a large TV, bikes or jewellery, under Extras. Accidental Damage, such as a broken vase or stained carpet, is often included as an optional extra here too.
Keeping serial numbers, purchase receipts and photos of items can help with cost assessment if you need to claim. You can find user-friendly calculators on most content insurance websites. Again, check the definition of the events covered by a policy to make sure it meets your needs and to avoid any unpleasant surprises, in the event you need to make claim.
Landlord insurance is available for long- and short-term tenancy rentals and can include building, contents, and rental income cover.
Choosing the best quote for you
Try to compare at least three quotes for each type of insurance. They will have Key Fact Sheets and Product Disclosure Statements (PDS) available online.
The main features to compare for any home insurance are;
- premium costs,
- event definitions,
- excess amounts and variations, and
- cover limits.
Also check for discounts on bundling policies, buying online and any safety measures you have adopted. Some may include additional services like replacing locks after a burglary. And while comparison websites can be useful, please remember that they may promote only paying businesses and will not show your full range of options.
While it’s not something we like to think about, minor mishaps and unexpected disasters can arise, so taking your time to select the most appropriate cover for your circumstances can prove valuable in the unfortunate event you need to make a claim.