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Fire, floods or burglary at your home could see you lose everything. This is why home and contents insurance exists. So, how do you find the best policy for your needs?
Audrey Bourget

25 May 2017 - 1:47 PM  UPDATED 25 May 2017 - 1:47 PM

If you want to protect your home and possessions against damage or theft, home and contents insurance is very important.

Home insurance is only for homeowners and is generally required by mortgage brokers, whereas contents insurance is for owners and renters.

Campbell Fuller, spokesperson for the Insurance Council of Australia, explains the difference.

"Contents insurance covers what's inside the property so it covers the financial cost of repairing personal possessions and furnishing - that can be furniture, curtains, white goods, music equipment, televisions, computers, clothing, jewellery, sporting equipment and even children's toys. Home insurance cover the building itself, so damages to the home or the apartment."

If you rent, your landlord should have a home insurance policy, but it doesn’t cover what you own. It’s your responsibility to get contents insurance.

The first thing to do before to look for an insurance policy is to go through your possessions. Tom Godfrey, spokesperson for consumer advocacy group Choice, recommends to list everything you own and the cost of replacing each item.

"The first thing is, it's a bit like doing a calculation. Go through your house and do a simple calculation of what your expenses are. Go through your house and see how much it would cost to replace the crockery, the cutlery, the bed linens, the books, CDs, DVDs, any clothing and footwear. Pretty quickly, you'll come up with a total figure that should inform what your contents policy should cover you for."

Once you have that number in mind, Tom Godfrey says it's time to start shopping around for an insurer.

"There are lots of ways to get contents insurance. There are many insurers offering it. There are also independent and commercial comparison sites. But the best thing to do, whichever way you go, is to get three quotes from three different insurers. Then make sure you match the premiums or make sure you match what's on offer for each one of them and then go for the one offering the best premium and the best value."

The premium is the amount you'll pay the insurer for your policy. Your insurer takes into account many factors when calculating it like your age, the location of your home and the contents you wish to insure.

The amount of excess you're ready to pay also has an impact on the premium, explains Campbell Fuller.

"The excess is typically several hundreds dollars up to five hundred dollars. It also means that the householder is unlikely to make a claim for the small things. It's a bit of a disincentive I guess for the everyday small things to be claimed on insurance. And that helps keep the cost of the policy down and that also helps keep the cost of insurance overall down. Now if you're ready to accept a high excess -and some insurers will allow you to increase your excess- then you'll find out that the cost of the policy falls as well."

Once you pick your policy, the insurer will rely on you to give accurate information. Make sure you have records of everything you own by keeping receipts and taking photos of the items.

Campbell Fuller says that giving wrong information, even if it's only a mistake, could cause you trouble when you have to make a claim.

"The insurer relies on the customer to give a lot of the information that goes into determining the premium. The onus is also on the householder to make sure the information is accurate because if you need to make a claim, the insurer will look at that information and if there's something that's untrue or has been misrepresented, then the insurer might take that into account when deciding on whether to pay that particular claim."

It’s important to make sure you don’t underestimate how much you own and that you update your policy every year.

"The primary thing is to make sure that you have enough contents insurance. Many Australians under estimate the value of their contents and also forget that each year, things change. So every year you should check your level of cover and update your inventory and then see if you need to adjust your policy, either up or down."

When you’re doing that check-up every year, also have a look around and compare prices. Tom Godfrey says that the best offers are often for new customers.

"If you have an existing home and insurance policy, it's really worth it, every twelve months stopping and comparing prices, comparing what's on offer, because we know that consumer get slapped with a lazy tax. New customers tend to get better deals than existing customers who renew every year without comparing prices."

Every policy is different. Some covers accidental damage while some do not.

Some will cover a piece of jewellery up to five hundred dollars, but you might have an expensive ring that needs additional cover. Tom Godfrey advises to read the fine print very carefully.

"As painful as it is, you do need to dig into the fine prints because you need to make sure that you're covered for the type of events that can occur in your area. Because one of the big issues that often comes up for consumers is flood cover. So you need to make sure that if you're in a flood-prone area that you can get coverage in the first place and that if you want flood cover you do activate directly with your insurer."

If you need more information about contents insurance, check out the websites choice dot com dot a-u and understanding insurance dot come dot a-u, where you can find buying guides, contents calculator and insurer comparators.

Useful links:

Understand Insurance, an initiative of the Insurance Council of Australia

Contents calculator and household inventory checklist

Find an insurer (insurer comparator)

Information about home and contents insurance by Choice