Last post, I showed you how to estimate the cost of rebuilding your house, and so determine an indicative amount to insure it for. This post we are looking at what is in your house. From all those things that have been there for so long, you don’t even notice them anymore, to everything you use on a daily basis. If you are at home reading this, stop what you’re doing and look around. Imagine every little thing you can see just disappearing like soap bubbles – pop, pop, pop! This includes the chair or lounge you’re sitting on, or the shoes on your feet. This is why you may require contents insurance.
What Are Contents?
Is my bathroom cabinet contents? What about my air conditioning unit? My rock and shell collection? Standard contents policies cover items in your house that are not permanently attached to your house. Furnishings, including carpets and curtains are contents. Bookshelves are contents. Furniture, toys, electrical equipment, white goods, even mirrors and pictures are contents that may all need to be replaced in the event they are destroyed. Standard contents insurance only covers items inside the house. If you lose your camera, laptop or favourite piece of jewellery while out and about, it won’t be covered under a standard policy.
Why Is Estimating Contents Insurance Difficult?
While the cost of building was a big unknown for me, the cost of contents is a lot more familiar. I see these prices in advertisements, when we go shopping, or hear about them in conversation with other people: “I just got a new TV, it was only twelve hundred bucks!”* What makes determining the value of contents so difficult is the sheer number of items that need to be priced. Particularly so after many years of domesticity, and a distinct lack of minimalism.
In theory, you should go to every room, and do a full inventory of every object. You’d then have to price each one to work out replacement value. I reckon if I tried this, the next annual renewal would have rolled around before I got finished!
*As I had no idea how much TVs actually are, I popped across to a popular online retailer. Did you know that there are $14,000 TVs?!?!?! I’m… I’m in shock!
How Do I Calculate Value?
This is where, like building insurance, the Internet steps in to make your life so much easier by offering contents insurance calculators. Just as there is really only a single body supplying the data for all building insurance calculators, Sum Insured Pty Ltd supplies the data for contents insurance. For this reason, I again picked the one with an interface I liked – the NRMA Contents Insurance calculator.
The tool begins with five questions covering:
- Your postcode
- The number of bedrooms in your house
- The ages and genders of people that live there
- The amount of clutter, and
- The quality of goods.
Next, it asks you to define the type and number of other rooms. Once you’ve done that – boom, an estimate. So easy!
If that is where you want to stop, then that’s probably good enough. It took me less than 60 seconds. Our detailed results are below:
Now, there’s actually a total of 33 standard categories of contents, but above you can see only 24 listed. This is due to our answers in the first five questions – because we don’t have children, the calculator hasn’t included children’s clothes or toys (“they’re not toys, they’re action figures“). They must have been reading my blog, though, because they also haven’t included Exercise/Fitness! For us, now is the time I would open up the games/hobbies category and add:
- Board games
- Card games
- Video game consoles
- Craft supplies
The Nitty Gritty
You might also want to dig deeper into the standard categories of items and make adjustments for each. Before you do this I recommend downloading the PDF with the base estimate – you’ll see why later. Our small appliances went from 38 worth $3,422 down to 18 worth $2,551. For some categories, you may want to put in the time to more accurately represent what you own. I found for others, such as cosmetics/medicine/toiletries, it wasn’t worth my time to edit the number of packets of cotton buds we own, or to differentiate between spray and roll-on deodorant. If we can go on holidays with only a comb, deodorant and soap, then I’m sure we’ll make do with whatever the “average” is if we ever needed to replace those types of items.
Issues with The Nitty Gritty
All up, this process takes a significant amount of time, and is mentally exhausting. To do it properly, I needed to save my answers, however the NRMA calculator doesn’t offer this option. Also, I wanted to generate a list of all the choices, for example, to print them out, stand in the room, and fill it in. You can’t do that either, except by taking a screenshot of the page. Quite frankly, I got fed up with the whole process, so my suggestions for anyone else who feels like I do is:
- Have a quick glance at what makes up each major category. Only bother making a change if you think you are far from the norm.
- Print your initial quote from above. Make changes to each category as above, then write the new total against the line on your original quote. Add up all of your handwritten items instead of the initial items. If you want to stop and come back another day, you will have to fill in the initial questions again, but this takes less than 60 seconds, so it’s fairly easy to resume.
You can create an account on the Sum Insured website itself to be able to save your valuation, however you do have to give details such as name, address, email etc. I suspect that if you did that, your items may end up contributing to the research they do…
QBE added an extra step that the NRMA calculator was missing – they prompted you for any extras you might have that aren’t covered under standard insurance. CGU offers a different set of questions as prompts. Add these to the NRMA calculator by adjusting the items, then clicking on the “Specified Items” link as shown above. You then get the option to “Add Another Item” where you enter the name and price.
Note that different insurance companies will have different rules for the type and amount of specified items they accept. You will need to check the PDS for the insurance companies you are considering before being able to insure these items. This may even become a point of difference for you to help choose a company.
What Else Does Contents Insurance Cover?
A further advantage of standard contents policies is that they usually include legal liability cover. If an injury or death occurs on your property, leading to a lawsuit, cover often ranges between $10 – $20 million.
Optional extras may include coverage for motor burnout, food spoilage, outside the home cover, Australia-wide cover, in-transit or storage cover, or any manner of other service the company dreams up.
We made a claim years back when thieves went through our neighbourhood. They broke into our garage, and stole our lawnmower and whipper snipper. When we told our neighbours, it appears that they had gone through our whole street and emptied us all out. One of our neighbours was actually grateful, because he discovered he had forgotten to renew his insurance. He was happy to pay the price of a lawnmower to realise that he wasn’t covered for his home or his contents! The claims process was easy, and the company paid for full replacement of a brand new mower and whipper snipper.
I always file receipts for large purchases, however I am considering moving to the cloud. I will take a photograph of the receipt, the serial number and the item, then store it in Evernote. This will make it very easy to find if I ever need to replace it. Also, we won’t lose all the receipts if the house suffers physical damage. If you have concerns about storing data like this in the cloud, then feel free to store it on your computer – as long as you have an offsite backup. There’s no use having proof of purchase of the item you’d like replaced if thieves stole the proof along with the item!
Great! Now you know how much contents insurance you need to buy. Of course, not all contents insurance policies are created equal. Due to the different offerings in both standard and added extras for contents insurance, it is imperative you read the Product Disclosure Statement. To learn more about what to expect in a contents insurance policy, the Insurance Council of Australia has created an excellent explanatory website, where you can read more about home contents insurance.
Once you understand what you are looking for in a policy, you can use a comparison website to shop around for the best price. They make you pay with an email address (and will immediately take advantage by sending through emails), but thanks to the Australian anti-spam laws, you can unsubscribe without penalty. Also, as Cath from Get Money Wise pointed out, the comparison websites only include companies that have paid to be there. To get a wide breadth of quotes, hit up more than one.
Have you ever had to claim on Contents Insurance?