Contents Insurance

What is contents insurance cover?

Contents insurance covers your personal belongings against accidental loss, damage (accidental or natural disaster), or theft. Typically, it covers furniture, appliances, electronics, clothing, jewellery, and other personal items. Contents insurance can be purchased as a standalone policy or as part of a comprehensive house insurance policy.

Indemnity value vs. replacement cover: understanding contents policy coverage

Understanding the difference between indemnity value and replacement cover is key for choosing the appropriate coverage under your contents insurance policy.

Replacement cover

This type of cover is offered in comprehensive contents insurance policies. It means that if an item is damaged or stolen, it will be replaced as brand new without any depreciation applied. You’ll sometimes even be covered for damaging someone else’s property! (Cover for other people’s property may apply if their items are damaged while at your address). The policy wording specifies which things fall under replacement value, which could include items such as electronics, furniture, and appliances. Comprehensive cover generally provides the best protection, however, can be more expensive.

Indemnity value

Some items in your contents cover may have indemnity value cover instead of replacement cover. This means that claims for these items will consider the depreciation of their value over time due to factors such as wear and tear, age, and changes in the market price.

Clothing, which is subject to wear and tear, is an example of an item that generally has indemnity value cover applied. Make sure you understand which items have indemnity value covered in your policy to be confident you have the right amount of protection for your stuff.

To sum up, the difference between the two types of policies is with replacement cover, damaged or stolen items are replaced with brand new ones without any depreciation applied, whereas with indemnity value, claims take into account the depreciation of the item’s value over time — this is a more basic cover.

Insuring valuables

When insuring valuables, it’s essential to check with the insurer about their definition of “valuables” and the single article limit they would pay out in case of a claim.

If you have items that exceed the single article limit (more on this below), you need to inform the insurer and pay more to cover the additional amount. For high-value items, you’ll need to provide evidence of the purchase and list them correctly on the policy document to ensure they are fully protected or you could be missing out on the key benefits of this type of insurance. Many policies won’t cover loss of money due to theft, so be careful when keeping cash around your house.

Insuring electronic devices

When insuring devices like laptops and smartphones, check if the coverage includes downloaded files and saved data. Policies generally won’t cover breakdowns. Some insurers offer an all-risk option that provides broader coverage, including accidental damage to the items (for example if you drop your laptop), but it may require an additional insurance premium.

What to watch for: tips for buying contents insurance

Check the maximum payout limit per item and per claim

This refers to the maximum amount that the insurance company will pay out in the event of a claim. You need to check this limit because if the value of your item(s) exceeds this limit, you may not receive total compensation for your loss.

For example, if your policy has a maximum payout limit of $2,000 per item, but your engagement ring is worth $5,000, you may only receive $2,000 from the insurer in case of loss or damage.

Make sure you understand the difference between indemnity value and replacement cover and what each policy offers.

Also, it’s important to make sure you have an appropriate sum insured. The sum insured is the maximum legal liability the insurer has in a covered event. For example, if your home burns down and you want to make a claim on your contents insurance, you can make a claim up to the amount of the sum insured. The insurer will assess things such as the maximum payout limit on individual items to work out how much they pay out.

If you’ve taken out a policy for $10,000 based on two items worth $5,000 each, but the insurer will only pay out up to $2,000 per item, you will be paying premiums for an amount of cover that you would not receive. So ensure you’ve taken into the account the maximum payout limit when working out your sum insured.

Understand what isn’t covered

It’s important to note that exclusions apply with contents insurance. Understand what falls outside of the coverage of your contents insurance policy, as the definition of “household contents” can differ among insurers. For example, typically covered items include domestic furniture, carpets, home appliances, personal effects such as laptops and mobile phones, and jewellery. It’s worth noting that the level of coverage offered by different policies can vary greatly.

Consider any additional coverage options

Do you need cover for accidental damage, fire, theft outside the home, or loss of keys? For example, accidental damage is a standard additional coverage option, which covers you in case you accidentally damage your possessions. Let’s say you spill a drink on your laptop and it stops working; accidental damage coverage could help cover the cost of repairing or replacing it.

Compare contents insurance today and get covered for what really matters.

Contents insurance FAQs

Is my mobile phone covered by contents insurance?

Your phone may be covered while inside your home, however, may not be covered if lost, stolen or damaged outside of your home. Check the Product Disclosure Statement (PDS) to learn more about whether your mobile is covered.

Does contents insurance cover my belongings while outside of my home?

Some policies may cover items while away from your address. However, it’s best to check the PDS to ensure this is the case.