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).

Sum Insured

Take care that you don’t under-insure your house contents (including anything rented such as a TV or video recorder) and that you periodically reassess their value and adjust your premium accordingly. Your contents should include everything that isn’t part of the fixtures and fittings and which you could take with you if you were moving house. If you under-insure your contents, your claim may be reduced by the percentage by which you’re under-insured. Some insurance companies offer policies called ‘no-sum’ or ‘fixed-sum’, where you aren’t required to value all your possessions but are covered for a fixed amount depending on the number of bedrooms in your home. With this type of policy the insurance company cannot scale down a claim because of under-insurance. However, you’re usually better off calculating the value of the contents to be insured. You can take out a special policy if you have high-value contents, which may be cheaper than a standard contents policy. Always list all previous burglaries on the proposal form, even if nothing was stolen.

Claims

Some insurers provide a 24-hour emergency helpline for policyholders and assistance for repairs for domestic emergencies, such as a blocked drain or electrical failure, up to a maximum amount for each claim. Take care when completing a claims form, as insurers have tightened up on claims and few people receive a full settlement. Many insurers have an excess of $50 to $100 per claim (see above). Bear in mind that, if you make a claim, you may need to wait months for it to be settled. Generally, the larger the claim, the longer you have to wait for your money, although in an emergency a company may make an interim payment. If you aren’t satisfied with the final amount offered, don’t accept it and try to negotiate a higher figure.

© Survival Books Limited 2006

“Buying a Home in Australia & New Zealand” 1st Edition, Graeme Chesters.
Reproduced with the permission of Survival Books Limited.

Further information on this topic can be found in “Buying a Home in Australia & New Zealand” 1st edition, by Graeme Chesters.

For extensive information about buying a property in Australia & New Zealand, you can purchase this book at www.survivalbooks.net