Advantages and disadvantages of home and contents insurance

To understand how home insurance and contents insurance policies are different, you only need to look at what’s on your property and what’s inside your home.

Your building, plus everything that’s outside and permanently fixed or installed may be covered by a home-only insurance policy, including your swimming pool, the garage, the tool shed, solar panels, and fences.

Meanwhile, most of what’s inside the home is covered by a contents insurance policy, such as your jewellery, electronics, furniture, kitchen appliances, memorabilia, and so on.

Some contents on your property or in your home that you often carry with you to the office or elsewhere may not be covered by a home or contents insurance policy when away from your property. For example, if your laptop is damaged by a power surge in your home caused by a lightning strike, your contents insurance may cover it. But the policy won’t cover it if it’s stolen or damaged when you’re travelling with it unless you take out additional portable contents cover.

Home and contents insurance effectively combines two insurance policies together. Some of the benefits may include:

• You deal with one insurer and pay for one policy rather than two, which brings down the cost of the insurance policy’s premium.
• Your policy may cover any damage to your possessions by disasters that also affect your home.
• You face less stress after a disaster as you don’t have to go through the process of filing insurance claims twice.
• You may be covered for any liability in case a visitor to your home is injured and requires treatment or hospitalisation.

In contrast, some of the potential drawbacks of a home and contents insurance policy include:

• You may need to buy optional additional coverage or exclusive coverage for some high-value items, or risk being underinsured.
• Some insurers may insist that you pay for safety net cover, which can help prevent being underinsured but can cost you more.
• The coverage limits for some of your belongings may not be adequate, as not all insurers offer compensation based on a “new for old” replacement.
• You could end up paying more out of pocket when you file a compensation claim as insurers may stipulate paying the higher of the two excesses for the home insurance and contents insurance policy.
• You’ll need to check the policy documentation more thoroughly to make sure there are no unexpected exclusions.

If you’re unsure if the policy you are buying is the right one, you can compare home and contents insurance policies online before choosing. This can help you understand the cost difference between a separate home insurance or contents insurance policy and a combined home and contents insurance policy. Also consider checking the home and contents insurance policy’s inclusions, coverage limits, and exclusions to make sure you’re getting value for your money.

After shortlisting a few policies, consider speaking to the insurance providers to get quotes and more specific information. You can also ask the insurers about any discounts they offer and any options for lowering the premium.