What level of home and contents insurance should you invest in?

If natural disasters foretell one aspect about home and contents insurance, it’s that more is more when it comes to the policy holder’s peace of mind and financial recompense.

Home and contents insurance is only as effective as the features offered by the insurer and your level of coverage. But in the event of natural disasters, including flooding and bushfires, is there a general guideline as to just what your home is insured for?

The trauma associated with damage or theft to your property is allayed by the fact that your home and contents insurance should cover most, all or a portion of the repair or replacement bill.

But many homeowners are underinsured and thereby face the risk of having to replace or rebuild some or all of the damage or loss at their own expense.

In terms of basic or full coverage and the inclusion of optional extras, it’s difficult to quantify for the unknown, but it’s better to be over-insured in the long run.

General insurance coverage

Most home and contents insurance policies provide coverage for the following events and incidents:

Natural disasters and other events such as fire or lightning damageTheft or malicious damage to your contents, including vandalismDamage caused by the sudden bursting of water or liquidThe impact from unforeseen hazards, such as a falling treeDamages caused to your contents during transit (up to 20 per cent of the sum insured).

What’s the cost?

Taking out home and contents insurance is a relative concept. The cost depends on the type and location of the property, age and investment status of the homeowner and level of coverage sought.

The cost of standard home and contents insurance for an average Australian and New Zealand residence is between $130 and $150 per month.

Extras such as temporary accommodation in the event that you need to vacate the premises for rebuilding or extensive repairs should be considered.

The suitability of insurers is another area to assess. For example, the value of your property and contents could exceed the underwriting criteria. As with all investments, it’s always best to shop around.

Most insurers provide online home, building and contents calculators so that you can methodically predetermine your initial costs and exactly what will be covered.

It all adds up to peace of mind

Estimate your property and contents value realistically, but with an emphasis on complete financial protection in the event of full or partial coverage. Retain receipts, wherever possible, as proof of purchase and estimable value.

Don’t forget to account for recent acquisitions, home renovations and property valuations to ensure your home and contents insurance aligns with its true worth. This might bump up your premiums slightly, but the peace of mind of being adequately covered is a priceless commodity.

Read between the lines

As with any real estate contract, it’s essential that the policyholder reads the fine print carefully. What exactly are you covered for and, importantly, when will damage or lost property be replaced or rebuilt? If you are unsure about any contractual legalese, seek qualified advice.