The Complete Guide to Contents Insurance

Content insurance requires you to know about the right amount of cover. If you cover too much, you would end up paying more than what is needed and if you cover too little, the insurance company would not pay out for your claim.

In order to make the right choice in your contents insurance quote, one has to know about the types of contents insurance policies and types of covers.

This complete guide to contents insurance will be of great use to you, especially if you live in New Zealand.

What is Contents Insurance

Contents insurance is a type of insurance that provides cover for your most prized possessions in the case that they get lost, stolen or even in some situations, damaged.

Basically, any item that is not part of your home, is likely to be covered by the contents insurance policy.

This is especially important in the case of an event where your belongings are destroyed by an external event out of your control, like a fire, flood or theft where if you don’t have contents insurance, you’ll be spending a lot of money to replace all of your belongings. 

Types of Contents Insurance Policies

In the present market, there are three types of policies that are available.

Unlimited Sum Insured

For this policy, the entire contents would be covered without any limits so as to ensure that you are not being underinsured. This is the best case scenario as it covers everything in your house (that is not considered a part of your house) if it gets damaged in the case of a bad accident. 

Sum Insured

Here, you will select the belongings that you wish to be covered by insurance. The value of these belongings must be determined before this policy can go ahead. 

Bedroom Rated

The insurer in this policy would work out the amount of contents is to be covered. It is also referred to as sum insured. The amount is based on the number of bedrooms in the home. The benefit for this type of policy is that the insurer would work out the amount of insurance needed instead of you. As a standard, most policies would provide between NZ$50,000 to NZ$60,000. The amount should be enough for most of the homes. However, it is important to ensure that it covers the possessions as well.

Although you can decide which type of policy is needed, it is vital to make a comparison between the insurance providers in order to make sure that you get the best policy which covers the right amount of contents covered.

What is the right level of cover?

If you moved houses, the contents insurance covers everything which you would take with you. The amount to be covered would need to be calculated in case you don’t have an unlimited sum insured or bedroom-rated policy. You can calculate the right level of cover in the following ways.

• List all the things that you own and estimate the cost for replacing each of the items at today’s price. 
• Use any of the online contents calculators to add up the value of replacement of all the things that would be needed to be covered.

It is important to be aware of the household and clothing items which would be prone to wear and tear. Thus, the downward trend would need to be adjusted.

Insuring Valuables

The definition of valuables varies from insurer to insurer. Therefore, you need to check with the insurer about their definition. Then, check the single article limit which the insurer would pay out in case of a claim.

For most of the contents policies, this amount would be about NZ$2,000. But, there are some insurers that might pay amounts of up to NZ$18,000.

Therefore, if you have a wedding ring or any other valuable item that exceeds the single article limit, then you would have to let the insurer know about it and would need to pay more to cover the amount. Here are some tips to ensure that such items are fully covered:

• Tell the insurer about the high-value items.
• Provide evidence of the purchase if inquired.
• Make sure that the item has been correctly listed on the policy document.

Insuring Laptops, Smartphones and Other Portable Devices

Some of the contents policies also cover things that one takes out of their home such as a laptop or a smartphone. However, it is advised to check whether the item has been covered.

The standard cover should include the cost of replacing the laptop or Smartphone, but it is advised to check if it covers things that have been downloaded on the phone or files that had been saved on the laptop.

There are some policies which even cover for digital information so make sure to check it out.

The majority of the policies do not provide cover if the items break down. Standard contents policies normally do not cover any money if you lose a Smartphone due to theft.

An all risks option would be offered by some insurers which would require an additional premium and should offer a wider cover such as in case of accidental damage to the items.

Don’t Underinsure

One of the most important things to keep in mind is to get enough cover to have all of the possessions replaced.

Otherwise, you would be surprised to know that the insurer would reduce the amount of the pay out, even if the claim is for just an item or two.

For example:

• If the possessions are worth NZ$30,000, but only an amount of NZ$15,000 has been insured.
• Since the total contents insurance would be half, the total claim payment would be half and you would only receive a lower amount for the items being claimed.

Types of Cover

The type of cover has an effect on the price of the premium. There are two different types of cover that are available.

Indemnity Cover

Only the current value of the possessions would be received so, if the table that needs replacing at a cost of NZ$3,000, the only amount that would be received would be for the old one which might be NZ$300. Despite the cheaper premium, it could simply be a false economy.

New for Old

This is more common. The amount that would be received would be for the replacement of the items.

Things to Look Out for When Comparing Policies

Different insurers would provide you with different levels of cover for their policies. Hence, ensure to be on the lookout for where the differences are and get the cover that is needed.

Sometimes the things might be right beneath your eyes. While IAG is set to stop providing contents insurance, there are still so many other companies that are still providing contents insurance so be sure to check them all out and the different policies they offer before you lock one down.