Having contents insurance is important to think about, whether you own your own home, are renting, have a holiday home or are a landlord offering tenants the use of your personal items.
A contents insurance policy provides cover against a range of adverse events including burglary, damage to your contents as a result of a natural disaster i.e. floods or earthquakes, unintentional damage to your possessions, for example accidentally breaking your prized vase or in the event of loss or damage to your belongings caused by a fire.
There are some instances where more expensive items may need to be specified on a policy, so it’s worth discussing this with your insurance broker to ensure your more valuable possessions such as items of jewellery, cameras or bicycles are included in your policy.
Most contents insurance policies will also provide cover if your possessions are stolen or damaged outside of your home provided this occurs within New Zealand so it pays to check with your insurance broker whether this is covered by your policy or not.
What items are included under a contents policy?
Contents insurance generally covers everything in your home that isn’t attached or fixed to the dwelling. This includes furniture, clothing, sports equipment, jewellery and other personal items that you own. It’s important to let your broker know if you purchase any new, valuable items during the term of your policy so that these can be included in the cover.
Some more complex and unusual items, such as drones, may not be included under a standard contents policy. It is therefore important that you review and consider any out of the ordinary items you may own, particularly if they are of a high value. An experienced insurance broker will be able to clarify for you which items are automatically covered, and provide you with additional guidance where needed.
Similarly, items used for business purposes may also not be covered under a personal contents policy; so, it is important you discuss this with a knowledgeable broker.
How are different items covered under a contents policy?
A good, comprehensive contents policy should include full replacement cover for many categories of item in the event that they are damaged, lost or stolen and you need to make a claim. This means that no depreciation will be applied and the item(s) will be replaced as brand new.
Your contents policy wording will specifically state what items are included under replacement value, so it pays to check the wording to ensure you understand what
Is covered by replacement and what is covered by indemnity (see below). Your insurance broker will also be able to clarify this for you, should you have any questions.
Some items will be covered for their indemnity value rather than replacement cover. This means claims for these items will take into account depreciation in the value of the item(s) over a period of time through age, wear and tear and/or changes to the market price if you were to buy the same item(s) in the current day. You will essentially be paid the value of what your contents were worth at the time of the event occurring. The most common type of item which will have indemnity value cover applied is clothing, which is subject to wear and tear over time and not made to last forever.
However, different insurance providers will have their own policy terms that determine whether an item is covered for replacement or indemnity insurance. Your broker will be able to clarify this further for you in line with your specific policy wording.
How much should my contents be insured for?
It can be challenging to determine the total value of your personal possessions; however, there are free, online calculators available that you can use to get you started. Getting in touch with a good broker will also enable you to ask questions and seek advice on how best to value your items.
As your policy will specify what will be covered for full repair or replacement value as if the item was brand new, and what will be covered for current value factoring in depreciation, it's worthwhile checking with your broker that you have itemised your belongings correctly to make sure there are no surprises should you need to lodge a claim.
Ultimately however, it is up to the policyholder to ensure they are comfortable with the amount being insured.
What else does contents insurance cover?
Some insurance companies may include cover in your contents policy for temporary storage costs for your contents, for example if you have to move out of your home for earthquake repairs. Your house insurance policy will usually cover your own temporary accommodation costs for a specified period of time.
In addition, if you are a tenant renting a house and inadvertently start a fire that causes extensive damage to the home, then you should have personal liability insurance covered in your contents insurance policy.
If you live in an area that is prone to flooding or other natural disasters such as earthquakes, then it’s a good idea to check with your broker what extra level of protection your policy provides.
To find out what Contents Insurance is right for you, get in touch with an NZbrokers member today.