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Australia: Home Contents Insurance

Overview

Home contents insurance is recommended for anyone who doesn’t live in an empty house. Burglary and house-breaking is a major problem in Australia, particularly in the major cities. Although there’s a lot you can do to prevent someone breaking into your home, it’s usually impossible or prohibitively expensive to make your home completely burglar proof without turning it into a fortress. However, you can ensure you have adequate contents insurance and that your most precious possessions are locked in a safe or safety deposit box.

Types Of Policy

A basic home contents policy covers your belongings against the same sort of ’natural disasters’ as building insurance (see Building Insurance, Australia Fact Sheet). You can optionally insure against accidental damage and all risks. A basic contents policy doesn’t usually include items such as bicycles, cash, credit cards (and their fraudulent use), jewellery, musical instruments, sports equipment and certain other valuables, for which you may need to take out extra cover. You can usually insure your property for its secondhand value (indemnity) or its full replacement value (new for old), which covers everything except clothes and linen (for which wear and tear is assessed) at the new cost price. The most popular form of contents insurance in Australia is replacement value, and it’s best to take out an index-linked policy, where the level of cover is automatically increased by a percentage or fixed amount each year. Most policies have a maximum amount they pay per item and/or a maximum amount per claim, e.g. $1,500 for each item of jewellery or work of art, or a total claim of $7,500.
A basic policy doesn’t usually include accidental damage caused by your family to your own property (e.g. putting your foot through the TV during a political party broadcast) or your home freezer contents (in the event of a breakdown or power failure). A basic policy may include garden contents, loss of oil and metered water, personal liability insurance (see below), replacement locks and temporary accommodation.

If they aren’t included, these items can usually be covered for an additional premium. Some policies include legal expenses cover (e.g. up to $100,000) for disputes with employers, neighbours, shops, suppliers and anyone who provides you with a service (e.g. a plumber or builder). Most contents policies include public liability cover, e.g. up to $2 million. Items such as computers and mobile telephones may need to be listed individually on your policy, and computers and other equipment used for business aren’t usually covered (or may be covered only for a prohibitive extra payment). If you have friends or lodgers living in your home, their personal property won’t be covered by your policy

Premiums

Your premium depends largely on where you live and your insurer. All insurance companies assess the risk by location, based on your postcode. Check before buying a home, as the difference between low and high-risk areas can be considerable. Annual premiums, which start at around $400 per annum in low-risk areas, can be several times this amount in high-risk areas. Many homeowners in high-risk areas would be willing to forego theft insurance, although insurance companies are reluctant to offer this option, as theft is a convenient excuse to load premiums.

As with building insurance, it’s important to shop around for the lowest premium, as premiums vary considerably with the insurer. If you’re already insured, you may find that you can save money by changing insurers. However, watch out for penalties when switching insurers. Combining your home contents insurance with your building insurance is a common practice and is usually cheaper than insuring each separately. Having your building and contents insurance with the same insurer also avoids disputes over which company should pay what, which can arise if you have a fire or flood affecting both your home and its contents. Those aged over 50 or 55 (and possibly first-time homeowners) may be offered a discount, and some companies provide special policies for students in college accommodation or lodgings (ask an insurance broker).

Security

Most insurers offer a no-claims discount or a discount (e.g. 5 or 10 per cent) for homes with burglar alarms and other high security features. In high-risk areas, good security is usually a condition of insurance. Beware of the small print in policies, particularly those regarding security, which insurers often use to avoid paying claims. You forfeit all rights under your policy if you leave doors or windows open (or the keys under a mat or flower pot), particularly if you’ve claimed a discount for impregnability. If there are no signs of forced entry, e.g. a broken window, you may be unable to claim for a theft. If you plan to leave your house empty for a long period, e.g. a month or longer, you may need to inform your insurer (you must also inform them if it’s a second or holiday home).

More pages

Page 1: Overview
Page 2: Sum Insured

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