What does contents insurance cover?

Contents insurance is designed to cover your possessions, in case they’re stolen, lost, damaged or destroyed. It’s called contents insurance because it insures the contents of your home, rather than the house itself or anything that’s permanently attached (fixed, wired or plumbed) to the house. Contents insurance doesn’t cover things like your car, caravan or boat either.

When should you get contents insurance?

Most people underestimate how much they own, but all the little things really add up to quite a surprising amount. If disaster struck – like a fire, earthquake, flood or burglary – you could lose the lot. The question is: could you afford to replace everything and get your life back on track?

The first time most people get contents insurance is when they move out of their parents’ home. This usually means going flatting or renting an apartment. In these situations your parents’ or landlord’s insurance won’t cover your possessions.

With more and more people renting for longer, rather than buying a house, it can be easy to forget about contents insurance. That’s because it’s usually bundled with the house insurance you must have when you get a mortgage and buy your own place.

How does contents insurance cover work?

Every contents insurance policy is different, so it’s important to read the details when deciding on the best deal for your needs and situation. In the meantime, here are the most common features.

What’s covered by contents insurance?

Nearly all policies will cover your possessions if they’re damaged or destroyed when in your home or stolen from it. Some will also provide loss or theft cover when items are with you away from your home, but still in New Zealand. In all cases, the maximum they’ll pay out will depend on the amount and type of cover you asked for when taking out your policy.

How to make a claim on contents insurance cover

When something you own is lost, stolen, damaged or destroyed – and it’s worth enough to warrant making a claim – you must let your insurer know as soon as possible after the event.

You usually have to pay an agreed amount towards the cost of fixing or replacing the items. This is called an excess. You choose how much this will be when you take out your policy. Choosing a higher excess will reduce your premium payments. However, be careful your excess isn’t so high that it becomes pointless making a claim. For example: if you have a $1000 excess and lose your $800 phone, it won’t be worth claiming.

When you do make a claim, the insurer will usually decide whether to repair or replace the item – or simply give you the money to go shopping for what you want.

Do contents insurers replace items with brand new ones?

This depends on your policy. Some offer repair to ‘as new’ condition or replacement with a brand new equivalent. Others only pay the current market value – this is called indemnity cover. Indemnity cover is cheaper, but may not provide enough cover to get you back on track. If your four-year-old laptop is stolen, for example, you’d only get what the same model from the same year is worth second-hand.

What about contents insurance for expensive items?

When it comes to things like jewellery, laptops, mobile phones, drones and electric bikes, most policies will have a maximum amount they’ll pay out for each item. If this doesn’t give you enough cover, you can usually pay a slightly higher premium to have a higher agreed limit. You may also need to list the high value items, to ensure you’re covered.

What isn’t covered by contents insurance?

Things that aren’t covered are listed in each policy as exclusions. They can vary widely, so be sure to check each policy before choosing one. Here are some typical examples:

  • Some policies won’t cover mobile phones, so you may need a separate mobile phone insurance policy.
  • The policy won’t cover anything you don’t own. If you’re renting, you won’t have any cover for furniture or unfixed floor rugs the landlord provided. However, renter’s contents insurance sometimes includes liability cover in case you damage other people’s property.
  • While one contents insurance policy usually covers the possessions of family members living together, if you’re flatting with others in a share house each person will need their own policy to cover their own possessions.
  • Most policies won’t cover items stolen by a guest or anyone living in the same house as you.
  • Some policies won’t cover a burglary where the thief didn’t have to force their way in, because a door was left unlocked or a window was open.
  • Many policies won’t cover your items while they are in storage away from the address in your policy, or while no-one is home for more than a month or two.

It pays to get good advice and shop around

Contents insurance policies can vary widely in what they cover, how much they cost and the reputation the insurer has for paying claims. It’s a good idea to ask friends and family about their experiences and to shop around before choosing a policy.

Another option is to talk with an insurance adviser who represents most of the main insurers. They’ll know what’s available and can suggest the best solutions for your needs. Advisers are usually paid by the insurance company you eventually choose, so there’s no extra charge to you.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an insurance advice service. It is only intended to provide education about the New Zealand insurances sector. Nothing in this article constitutes a recommendation that any type of insurance cover is suitable for any specific person. We cannot assess anything about your personal circumstances, all of which are unique to you. Before making insurance decisions, we recommend you seek assistance from an insurance adviser or expert.

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