What is contents insurance?

Contents insurance is a form of insurance that covers your personal possessions in the event of loss, damage or theft. Many insurance providers sell contents insurance as part of a package deal with home insurance, offering discounts if you purchase both together, but it is generally also available to purchase separately. 

What types of contents insurance are there?

Contents insurance is designed to cover the cost of replacing or repairing your personal belongings if they're stolen, lost, or damaged in your home. 

Contents insurance is available for both owner occupiers and renters. As an owner occupier, you can buy contents insurance as a stand-alone policy (such as if you're in an apartment where the building is covered by strata insurance) or package it with home insurance to cover your home’s structure. As a renter, you can buy contents insurance to cover your personal possessions in your rental property, as the structure is the landlord's responsibility.

There are two main types of contents insurance to choose from:

1. Value of your belongings: Some contents insurance policies cover items based on their current value, accounting for depreciation.
2. New for old replacement: Some contents insurance policies cover the cost of replacing your belongings with new items, regardless of their age or condition at the time of loss.

Because policies offering new for old replacements cover the full cost of replacing your items, these may be more expensive than more basic contents insurance policies, which cover for the current value of your possessions only.

What is covered by contents insurance?

Contents insurance typically covers a wide range of personal possessions and household items, including but not limited to:

• Furniture and home furnishings
• Electrical goods and appliances
• Clothing and personal effects
• Jewellery and valuable items, up to specified limits
• Tools and gardening equipment

Policies usually protect against risks such as theft, fire, storm, and flood damage, although coverage can vary significantly between insurers.

What isn’t covered by contents insurance?

While contents insurance offers extensive coverage, certain items and situations are typically excluded:

• Wear and tear or damage due to lack of maintenance
• Business stock if you're running a business from home (without specific coverage)
• Damage from vermin or insects
• High-value items beyond specified limits, unless individually listed on the policy

It is also worth noting that contents insurance covers your possessions only. Your home’s actual structure is covered by home insurance, which you can buy as a separate policy or bundled with contents insurance. 

How much contents insurance do I need?

If you decide to take out contents insurance, you could start by preparing a thorough inventory of your personal possessions and accurately assessing their replacement value. This may help you avoid underinsurance, which can leave you short when you make a claim, or overinsurance, which may lead to unnecessarily high premiums by providing more coverage than you need.

How are contents insurance premiums calculated?

There is no one set price for contents insurance. Instead, insurance providers will calculate premiums based on several factors, including:

• The value of your contents
• The type of cover (the value of your belongings vs new for old replacement)
• Your home's location and its risk profile (e.g. crime rates, natural disaster risk)
• Security measures in place at your home (e.g. camera systems, burglar alarms, locks)
• Your claims history and chosen excess

How can I save on premiums?

If you’re thinking about how to save on contents insurance, there are several strategies to reduce your premiums. 

First of all, it can pay to shop around and compare policies to find out if you could be paying less with a new provider - some providers even offer signup incentives and deals to new customers. If you have separate home and contents insurance policies, you might also consider bundling them together with the same provider for a package discount.

Increasing the excess on your policy can reduce premiums, though keep in mind that this will mean needing to pay a higher excess out of your own pocket when you make a claim, before your coverage kicks in. Similarly, you could consider only insuring your items for their replacement value, rather than new for old replacement, to save on premiums, though  this can lower your payout if your items do need to be replaced. 

Finally, taking steps to protect your contents, such as installing security alarms and cameras, can help lower your premiums. Ask your existing contents insurance provider if this could be the case for you.

How to choose a contents insurance policy

Choosing the right contents insurance policy involves comparing offers from various insurers, considering the coverage extent, exclusions, premiums, and the claims process. It's essential to read the Product Disclosure Statement (PDS) carefully to understand what you're covered for and any applicable terms and conditions.

When selecting a policy, consider your specific needs, the value of your possessions, and any special coverage requirements for high-value items. It may also help to check insurer reviews and ratings for customer satisfaction and claims handling efficiency.

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