You’ve worked hard to create the life you want and, as the old saying goes, “your home is your castle”. So imagine for just a minute that, through no fault of your own, you suddenly find yourself having to start from scratch.
Building and contents insurance can be helpful for Australians who are looking for a bit of extra confidence in knowing their home and belongings might be covered if something goes wrong.
The worrying fact is that break-ins are on the rise, with the Australian Bureau of Statistics (ABS) reporting 151,200 victims of unlawful entry with intent recorded in Australia in 2022 – an increase of 9% from 2021.1 Around 70% of these instances occurred at residential locations, and 62% involved the taking of property.
While an insurance policy won’t stop you from becoming a victim of crime, it can help to cover you and your family should the unthinkable happen. And we’re not just talking about burglary.
Some building and contents insurance policies can help protect homeowners and tenants from the loss or damage caused by all kinds of mishaps and disasters – whether they’re small events such as broken windows or major events such as bushfires, floods and other natural disasters.
While policies might seem similar, not all building and contents insurance cover is created equal. And it’s easy to make mistakes when it comes to choosing and maintaining your policy, or when trying to compare different policies.
Here’s a look at some common mistakes people can make when purchasing their building and contents insurance.
1. Underinsuring property and belongings
Underinsurance is when you don’t have enough building and contents insurance to cover the replacement value of the items you’re insuring. According to the Insurance Council of Australia, this most commonly happens when the replacement value of property and belongings hasn’t been properly calculated.2
While many everyday items will decrease in value over time, some things you own might actually increase in value – fine art, jewellery or antiques, for example.
To help avoid underinsurance, Youi Head of Product – Home, Mervyn Hartley, suggests using an online tool such as this Sum Sure Calculator to help estimate the cost of rebuilding your home; then assessing the value of its contents by going room to room to create a detailed household inventory that is updated annually.3
“Make sure you’ve thought about all the items you need cover for,” says Hartley.
2. Not doing enough research
Everyone’s circumstances are different, so the building and contents insurance policy that works for your extended family or friends might not be suitable for you.
Insurance policies come in many shapes and sizes, and taking the time to work through what each policy could mean for you is important. Reading and understanding the product disclosure statement (PDS) of the policy you’re considering is a good way to learn what’s covered and what’s not.
“You need to think about your own situation when choosing the building and contents insurance that will best suit you,” says Hartley.
“Most insurance companies cannot give personal advice, just general advice, so you’ll need to consider the information and make your own choices.”
3. Forgetting your work equipment
When it comes to possessions, many people fail to connect their workplace to their home, despite the fact that many of us now work from home on a regular basis.
That laptop you bought for work or those tools you use on the building site may have been purchased for use mainly outside the home. But you should consider if you need to take out additional cover in your contents policy for if something should happen to them at home, or even away from the home, with Youi’s optional Business Items cover.4
4. Forgetting to update policies
It’s common for families to split the admin duties when it comes to managing household paperwork but, when it comes to building and contents insurance, it’s important that everyone is on the same page. This can reduce the risk of things being overlooked, especially when new items might need to be added to your policy.
It can be a good idea to reassess your contents cover whenever a member of your household purchases a significant new item – think personal technology such as laptops or mobile phones, designer handbags or clothes, or appliances such as televisions.
If it’s a high value item, it’s often worth letting your insurer know as you may want to list it on your policy and change your sum insured. If you forget or neglect to include something, Hartley says you might find that you don’t have sufficient coverage in the event of a total loss.
“If it’s a high-value item that needed to be listed, you may find that the cover for that item is limited,” he says.
5. Only focusing on price
We get it – money matters. But it shouldn’t be the only thing you consider when you’re weighing up the right building and contents insurance policy for you. A low premium won’t matter one bit if your insurer doesn’t pay out after an insured event.
Again, familiarising yourself with the PDS of the policy can be is a good way to know what’s covered and what’s not.
Before you start to collect quotes from different insurers, take a good look at all of your possessions and consider their value. If they were all damaged, how much would it cost to replace them?
Keep that figure in mind when you evaluate not just possible premiums, but also the limits and excesses for your different cover options. For example, some insurers might require you to list any items over a certain value – so it could be helpful to compare the differences between insurers and what it would mean for your cover.
6. Not reading the fine print
Insurance policies come with various details on what incidents you are covered for and how your insurer will pay out claims. There should also be details about how much they’ll pay up to for each covered incident.
For example, some building and contents insurance policies cover water damage but the details can be very different for each. If all you read is that a potential policy pays out for water damage, but don’t note in the PDS or other policy documents that the cover does not pay for flood, you could wind up with insurance that won’t pay out when you really need it.
“At Youi, flood cover is automatically included in all home insurance policies5 but with some other companies, you will have to choose to add this as an optional cover.”5
The bottom line? Familiarise yourself with the PDS, and always read the fine print.
7. Forgetting home renovations and upgrades
Australia’s love affair with home renovations is nothing new and, despite the cost of living pressures of recent years, data from the ABS reveals Australians spent more than $2.6 billion renovating our homes in the March 2023 quarter.6
So, if you’ve put in a media room and filled it with the latest tech, you might want to update your contents policy to reflect the extra items you now own.
If your renovations are extensive, you might also have to reassess the value of the home itself and the cost to rebuild, which could in turn affect your home insurance premium and the amount you might be able to claim in the case of an insured event. A tool such as the Sum Sure Calculator could help you assess how much the updated building is worth.3
“Your home insurance premium can be influenced by many different factors, but one of the key ones is the sum insured – your estimate of how much it would cost to rebuild the home,” says Hartley.
“A home that costs more to rebuild will typically be more expensive to insure than one that could be built more cheaply.”
Also, home insurance policies typically have conditions and exclusions which you will want to keep in mind if you are renovating your building; such as to the cover for legal liability, storm and accidental damage.
If you have a Youi Home insurance policy, you must contact us to tell us about any building, construction, and/or major renovations commencing, which is a good opportunity to check your sums insured and ask us any questions you have about how your cover is affected by the works.
8. Not being covered for items outside of the home
Some belongings leave the house more often – sunglasses, digital cameras and laptops, for example. What you might not know is that it’s possible to have these items covered even when they’re away from the house.
However, Hartley says this is often ‘optional cover’, so it’s best to check with your insurer.
“With Youi, the Contents Accidental Loss or Damage option gives you cover for contents, items and jewellery away from the premises,” he explains.7
“If you want cover for portable items, this option is one to consider. For individual items worth more than $15,000, you can choose whether to add the optional cover for the individual item.”7
9. Thinking ‘it will never happen to me’
Imagining a disaster occurring in your home is something most of us would prefer not to think about. But a disaster at home without an insurance policy could really wreak havoc on your finances.
Don’t assume disastrous events won’t happen to you. Planning ahead with a building and contents insurance policy, and updating your cover so it’s current and suitable to your individual needs, are two ways you can help protect yourself. Consider starting a quote today.
1 Source: Australian Bureau of Statistics – Recorded Crime – Victims, June 2023
2 Source: Insurance Council of Australia – The risk of underinsurance
3 Source: Cordell Sum Sure – Sum Insured Calculator
4 An additional cost applies and is available with Building & Contents policies. For business items, additional restrictions apply. For more details, see the Home insurance PDS
5 Exclusions and limits may apply. Cover not available within the first 72 hours of taking out the policy. See PDS for full details
6 Source: Australian Bureau of Statistics – Building Activity, Australia, July 2023
7 An additional cost applies and is available with Building & Contents policies. For more details, see the Home insurance PDS