Five common misunderstandings about home and contents insurance

You need to remember that a contents insurance policy only covers the objects physically located on your property or inside your house. For example, you may not be able to file an insurance claim if you lose your jewellery or other valuable possessions while on a trip or otherwise outside your home.

To ensure coverage during such instances, check if your insurer offers portable contents cover. This may cost extra, and some specific items may need to be specifically added to the policy or even insured separately, but it can give you more peace of mind while you’re out of the house.

Even if you take out a home and contents insurance policy based on a thorough estimate of the cost of replacing your belongings, you may still end up effectively underinsured if your home’s contents include valuable items that exceed your insurer’s maximum coverage limits. For example, your insurer may cover up to $1000 per item for electrical appliances, but if your $2000 television is stolen, you’d have to pay the difference yourself.

Also, even if your insurance covers the present value of your home’s contents, this may not be enough to replace everything if prices rise in the future. You could choose a higher ‘sum insured’ limit to get extra coverage, or choose an insurer that offers ‘new for old’ replacements, though this could make your insurance more expensive.

When insurers talk about loss or damage, they’re usually referring to theft and accidents. If you misplace an item, or lend it to someone who loses it, it is unlikely you’ll be covered by your insurance. 

Your belongings may also be damaged from incidents that your insurance policy may not cover items like a water leak due to poor maintenance of your home’s plumbing.

Before buying your insurance policy, you should ideally check the list of insured events and discuss any exclusions with your insurer.

As you acquire new experiences in life, you may also collect new memorabilia of these experiences. After owning your home for a few years, you will likely buy a few more valuables, which may also need to be insured. 

It may be helpful to keep an up-to-date list of your home’s contents that you can reassess when updating your insurance. This will help you gauge if you need to upgrade your home and contents insurance policy or purchase additional coverage for some of the high-value items.

You’ve successfully listed and evaluated all the contents of your home, you’ve checked the coverage options, and you feel ready to buy your home and contents insurance policy. But when you compare the rates quoted by different insurers, you may find surprises when you enter your postcode. 

Insurance costs can vary depending on your location. For example, if you live in an area with a higher crime rate, or at a higher risk of natural disasters, insurers may charge higher insurance premiums or require you to buy additional coverage for specific events.