How Much Contents Insurance Do I Need?

What is contents insurance and what does it cover?

Contents insurance provides cover for your possessions, should they become lost, stolen or damaged. It usually covers everything from your furniture and appliances to your clothing, cutlery, and everything in-between.

While contents insurance is commonly bundled together with home insurance, it’s not only for homeowners. It’s a good idea for renters to insure their possessions, too. For while renters are typically covered against burning down their house (through their landlord’s insurance), their possessions are their own responsibility.

Related article: How Does Renters Insurance Work in NZ?

What types of contents insurance are there?

There are two types of cover typically offered, with many policies offering a mixture of both cover types:

Replacement value

This policy ensures that if something you own gets lost or damaged, your insurance company will either replace it with a brand-new item or repair it to be as good as new. For example, even if your TV is a few years old, it will be replaced with a brand new one of equal value. If you lose a 32″ smart TV, you’ll get a new 32″ smart TV.

However, there are certain limits to what’s covered, like for expensive jewellery, so it’s important for customers to double-check their policy details with their insurance provider.

Some items, especially those that become outdated quickly or are very old, might not be eligible for full replacement value. With replacement insurance, the item will typically be repaired or replaced. But if you prefer a cash payout instead, you might only receive what the item was worth at the time of the loss, depending on the specifics of your policy.

Indemnity value

An indemnity policy ensures that after a loss, you end up in the same financial position you were in before the loss occurred. This means you’re neither better nor worse off financially than you were right before the incident.

The settlement you receive is based on either the second-hand value of the item or the cost to replace it, minus an allowance for its age and wear and tear (depreciation). This value is sometimes called Market Value or Present-day Value. Your policy document will provide more details about how this works.

Typically this is offered on items that have shorter life spans, or are more prone to wear and tear, such as clothing, bedding and certain sports equipment.

Related article: What Is Home and Contents Insurance and What Does It Cover?

How much contents insurance do I need?

When you’re taking inventory of your belongings, it’s natural to focus on the big-ticket items like your TV, fridge, bed, espresso machine, and dining table. However, don’t forget about the smaller things.

Towels, sweaters, plates, bowls, an electric pepper grinder, wine glasses, sunglasses and ornaments might seem insignificant individually, but when you add them all up, the costs can be surprisingly high.

Be sure to consider the value of all your belongings, big and small, so you’re not underestimating the worth of your possessions.

How to calculate how much contents insurance you need

First off, you’ll need to catalog all your belongings. While it may take some time and involve going through each room, it’s essential to know what you own to ensure adequate coverage. Additionally, snapping some photos is a smart move. In case of loss, having visual evidence of your possessions can streamline the claims process.

Once you have an idea of what you have, you need to work out the total value needed to replace them. This is the important part. You don’t want to be covered for the cost of your TV, you want to be covered for the cost of replacing your TV.

Most contents insurance providers have calculators on their websites that can help. These will quickly provide you with lists of typical household items, and average values. But it’s important to edit the calculations in order to reflect your own situation. So ensure you go through the list provided, adding and editing the contents and their values to best match your own list.

Once you’ve completed this process, you’ll have an estimated total value. This figure can then guide you in setting your sum insured, ensuring you have adequate coverage.

Sum insured

The sum insured is the maximum amount you can claim on your contents insurance. Should you lose all your possessions, your sum insured will be the max amount you are able to claim from your insurer. If replacing all your items costs more than this amount, you will have to make up the shortfall yourself. So make sure you set it high enough.

It’s worth noting that if you lose all your possessions, you won’t simply be given the sum insured amount. Your insurer will only pay what is required. So if they can replace all your contents for less than the sum insured, they will. For this reason, it’s also important not to over insure; as you’ll be paying higher premiums for insurance that you won’t be able to use.

Why should I review my insurance?

A common mistake many people make is setting and forgetting their contents insurance. But every time you buy something new, or replace an old item with a newer, better one, the value of your home’s contents grows. So it’s important you update your contents insurance to match.

Furthermore, due to inflation, even if you haven’t bought any new possessions, the cost to replace your home’s existing contents will have probably increased.

How does contents insurance work?

When making a claim, you’ll need to compile a list of everything that has been damaged or lost and the value of those items. The more evidence you have, the better. So receipts, photos and any other evidence that can help prove ownership and value can make the process a lot easier. If you don’t have any evidence, it’s not necessarily the end of the world. But, it can certainly make the process harder, and it can impact your claim.

For example, an empty TV stand and a Sky box plugged into nothing is a pretty good sign your TV was stolen. But, if you have no evidence as to the make and model of your TV, you may find your top-of-the-line set is replaced with a more basic model.

Once your insurer has approved your claim, they will either repair the damaged items, replace them, or give you a cash payout.

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About the author of this page

This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.