Three expert home and contents insurance buying tips
Three simple rules can help you save money when purchasing home and contents insurance, without having to compromise on your level of cover:
Don't set and forget: avoid the temptation to auto-renew
Insurance companies often don't offer their best deals to their existing customers, hoping that they'll just renew without much thought.
So when it's time to renew your home and contents insurance, don’t just accept your insurance company's automatic renewal offer without comparing prices across other providers.
You might find a better deal, or a policy that better matches your needs. And don't be afraid to ask you insurer to match any competitor offer. Ultimately, they won't want to lose your custom.
Don't get sucked in by offers and bundling deals
While sign-on offers and deals can seem appealing, they shouldn't be your sole focus when shopping for insurance. These discounts are often used as marketing tools to make a policy seem more attractive. The overall price of a policy and the coverage it offers are what truly matter.
ALWAYS read the fine print of the policy's Product Disclosure Statement (PDS)
Before committing to an insurance policy, take time to thoroughly read and understand its terms and conditions. For while it's important to ensure the policy provides the cover you require, it's also important to understand the policy's exclusions – what it doesn't cover – so you're not left underinsured and out of pocket in the event of a claim.
What is home and contents insurance?
Home and contents insurance is a type of cover designed to protect homeowners financially if their property and/or its contents are damaged, destroyed or stolen in certain circumstances. For example, if your home is destroyed by a fire and your claim is approved, a home and contents insurance policy may cover all or part of the cost of rebuilding your home and replacing its contents. There are several different types of cover available, depending on what level of cover you need and whether you live in the property or rent it out.
What different home and contents products are available?
Home insurance
Home insurance provides cover if the main structure of your home is damaged or destroyed by certain insured events, which could include natural disasters, like floods and storms. Home insurance may also provide cover for other permanent outbuildings or fixtures of your property, such as sheds and garages. This type of policy doesn't cover damage to any valuables contained within the home.
Contents insurance
Contents insurance protects the policyholder financially if the belongings in their home (e.g. furniture, electrical appliances or jewellery) are damaged by an insured event and need to be repaired or replaced. This type of cover is sometimes sold as renters' insurance.
Home and contents insurance
A combined home and contents insurance policy provides cover for both a building and its contents.
Landlord insurance
Landlord insurance is designed to cover many of the same risks as building-only insurance, but also certain risks specific to those who rent out their properties, such as the cost of repairing damage caused by a tenant.
What does home and contents insurance typically cover?
Home and contents insurance typically covers the policyholder for financial loss if their property or the valuables in it are damaged or stolen. Insurance policies specify certain 'insured events' that are covered, but it's important to note that not everything is covered and there can be limits and exclusions. Some risks may be covered as standard by a policy, while others can be added as optional cover. What’s covered will also depend on whether you have building-only cover, contents-only cover or a combined policy.
Some of the risks commonly covered by building-only insurance (including the home insurance component of a combined policy) include:
- Fire
- Storm
- Flood
- Earthquake
- Explosion
- Impact damage (e.g. from a car or a falling tree)
- Escape of water (e.g. from a burst pipe)
- Vandalism and riots
- Legal liability (e.g. if someone is killed or injured while at your home)
- Temporary accommodation if your home becomes uninhabitable due to an insured event
Contents insurance typically covers your valuables against the same kinds of risks, but depending on the policy may also cover risks such as:
- Theft
- Damage to home contents while in transit
- Damage to, or theft of, valuables belonging to guests or visitors in your home
Before taking out a policy, it's important to check the Product Disclosure Statement (PDS) carefully or speak to your insurer so you understand what you're covered for, what's excluded and whether any limitations or waiting periods apply.
What's the best home and contents insurance for me?
When looking for the best home and contents insurance for your property, you may want to consider a variety of factors to ensure the policy stacks up against the other options available to you. Here are examples of some of the factors you may want to keep in mind when comparing policies:
- What level of cover does the policy offer? For example, if your home is destroyed and you make a claim, will the payout be enough to replace the property to the necessary standard?
- Does the policy provide cover for any risks that may be particularly relevant based on your location (e.g. flood cover)?
- What's your budget? Are you happy to pay extra for a higher level of cover, or would a basic policy be sufficient?
- Does the provider allow you to pay your premiums monthly at no extra cost?
- Are there any discounts on offer, such as a reduced premium if you take out the policy online or a multi-policy discount if you take out another kind of cover with the same provider?
- What excess is payable if you need to make a claim?
- Do the premiums quoted offer good value when compared to those from other providers?
- Does the policy provide new-for-old cover for items that are damaged and cannot be repaired?
- Does the policy provide sufficient cover for any particularly valuable items in your home, such as a piece of art?
To help Kiwi homeowners find the best value home and contents insurance for their needs, Canstar rates a broad range of policies based on premiums and the level of cover on offer. In addition, Canstar's Awards recognise the home and contents insurers that offer outstanding value to consumers overall.
How much should I insure my house for?
Your level of house insurance is called your sum insured. The sum insured should cover the total amount it would cost to rebuild your home in the event of a disaster or accident, it includes demolition costs, debris removal, professional fees and council fees. It doesn't include the value of your land, so it isn't the market or rateable value of your house or property.
Some insurance providers automatically increase their customers' sum insured values each year in line with rising building costs. But even if your insurer provides this service, it's still worth checking to see if you agree with their sum insured total.
There are a few methods for working out the cost to rebuild your home:
Online calculator
Many insurers have links on their websites through to the Cordell Sum Sure calculator. The handy tool uses Cordell's construction costs data to give an estimate of the cost to rebuild your home. All you have to do is answer a few quick questions about your home, and the calculator does the rest.
Cost per m²
Using average building costs per m² is a quick, rule-of-thumb way of calculating the cost of rebuilding a home.
However, while it can give a ballpark figure, it can also be very misleading. Average per m² figures don't take into consideration the design details of a home, the true distribution of building costs and materials, or any demolition or site clearance that may be required.
Elemental estimating
Elemental estimating is the most thorough method of ascertaining the true cost of rebuilding your home. It covers every aspect of the rebuild, from plans and council permits, the specifications of each room in your home, through to your garden and landscaping, pool, external garaging, etc.
As it requires specialised industry knowledge, elemental estimating is a professional service best left to the experts. But while such a thorough report will, of course, cost more than a free online quote, it could prove invaluable if your home is of exceptional value or design.
No one-size-fits-all value
As each home is different, there is no one-size-fits-all replacement value answer. However, by revising your sum insured figure annually to ensure you've enough cover to rebuild, you can rest assured that if a natural disaster or accident affects your home, it won't turn into a financial crisis.
How much contents insurance do I need?
When going through your contents, it's easy to check off your big-ticket items. But alongside your TV, fridge, bed, espresso machine, dining table and all things expensive, it's important to sweat the small stuff.
When you add up the value of your towels, sweaters, plates and bowls, kitchen utensils and other small household items, the costs can quickly climb. So it's essential to ensure you're not undervaluing your contents cover.
Calculating how much contents insurance you need
First, take note of all your contents. This can be time consuming, and you'll need to go room-to-room taking note of everything, but it's important to know what you have to cover. At the same time, it pays to take photos. For, should you lose your possessions, being able to provide some evidence of what's been lost will make the claims process a lot smoother.
Once you have an idea of what you have, you need to work out the total value needed to replace your possessions.
Contents insurance providers have calculators on their websites that can help. These will quickly provide you with lists of typical household items, and average values. But it's important to edit the calculations in order to reflect your own situation.
Once finished, you'll have a total estimated value. This can then be used to help set your sum insured.
Sum insured
The sum insured is the max possible amount you can claim on your contents insurance. Should you lose all your possessions, your sum insured will be the max amount you are able to claim from your insurer. If replacing all your items costs more than this amount, you will have to make up the shortfall yourself. So make sure you set your sum insured at an adequate level.
It's worth noting that if you lose all your possessions, you won't simply be given the sum insured amount. Your insurer will only pay what is required. So if they can replace all your contents for less than the sum insured, they will. For this reason, it's also important not to over insure. As you'll be paying higher premiums for insurance that you won't be able to use.
It's also important to choose the right type of cover...
Choosing which type of cover: new for old vs indemnity
Much like home insurance, you have two choices/types of cover for contents.
- New for old cover – replaces your lost or damaged possessions with comparable new items
- Indemnity value cover – only pays the value of your damaged possessions at the time of their loss
While new-for-old contents insurance is more expensive than indemnity value cover, in the event of a disaster, it could save you tens of thousands of dollars.
Second-hand goods depreciate in value very quickly. And with only indemnity value cover to fall back on, if you’re faced with replacing a home's worth of possessions, you could face a major shortfall between your insurance payout and the cost of the new items.
