What Is Home and Contents Insurance and What Does It Cover?

What is home and contents insurance?

Home and contents insurance is designed to cover you financially should something happen to your home and/or belongings. It consists of two components:

• House insurance – cover for your house and land
• Contents insurance – cover for the contents kept inside your home/on your property

There are also alternative forms of the above, such as landlord insurance and renter’s insurance. While the details of these plans differ, they, again, consist of some combination of the above. Protection for your home and/or protection for the contents kept inside the home.

What type of home and contents insurance do I need?

What type of home insurance you need depends on your personal circumstances. However, here are some typical hypothetical scenarios:

Own a home and live in it:

If you own your home, you may want to take out a combined home and contents insurance policy. Combining a home and contents insurance policy can often lead to discounts. If you have a home loan, it will be a condition of your loan that you have house insurance.

Own an investment home (landlord):

Landlord insurance is a specialised type of insurance designed to assist property owners who rent out their homes or businesses. It’s intended to address the various issues and risks that landlords may encounter when dealing with tenants, ensuring that landlords have financial protection when problems arise with their rental properties.

Landlord insurance typically covers loss or damage to an investment property and furnishings. Some landlord insurance covers unpaid rent from troublesome tenants, or methamphetamine contamination cover, which can be valuable.

Related article: What is Landlord Insurance?

Living in a rented home:

If you are a renter, you would only need to consider contents insurance or renter’s insurance.

These are more or less the same, but some providers do have a specific renter’s insurance policy that may have some differences from a standard contents insurance policy. For example, cover for accidental damage to furnishings in the rented property.

Related article: How Does Renters Insurance Work in NZ?

What does house insurance cover?

Home insurance covers your house if it is damaged or destroyed due to an ‘insured event’. Cover will vary between insurers, but it generally covers events such as:

• Fire
• Theft
• Storm
• Earthquake
• Explosion
• Impact damage (such as from a car or a falling tree)
• Escape of water (such as from a burst pipe)
• Vandalism and riot
• Other accidental loss

In addition to this, insurers may offer benefits, such as legal liability cover (covers your liability to pay compensation if someone is injured or their property is damaged at your home) and temporary accommodation (if your property becomes uninhabitable because of an insured event).

Sum insured vs total replacement

Sum-insured cover is when you provide an estimate of how much it would cost you to rebuild your home if it was totally destroyed. That is then the amount your insurer will pay up to in the event your home is lost. You’ll need to ensure that your total sum insured reflects the current market value of your home, which may mean making changes to your policy over time.

Total replacement cover insures you for the total cost of repairing or rebuilding your home, regardless of price. Total replacement insurance is the quicker and easier option when compared to sum-insured cover, as you do not need to work out the value of everything. However, it can also be the more expensive option.

Note: some insurers offer extra cover, usually on their more premium home insurance products, that pays out over and above the sum-insured amount should it not cover the full price of the home’s rebuild in the event of its destruction by an event that’s not a natural disaster, for example by fire.

What does contents insurance 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 jewellery. Some insurers cover boats and bicycles within their contents policies, but others will charge you extra premiums to add these to your policy.

Depending on the policy, it might also provide cover for items in transit, in an external storage unit, or even items that are kept on your person, such as your mobile phone.

New for old vs indemnity

Much like home insurance, you have two choices/types of cover for contents.

• New for old cover – replaces your lost or damaged possessions with comparable new items
• Indemnity value cover – only pays the value of your damaged possessions at the time of their loss

While new-for-old contents insurance is typically more expensive than indemnity value cover, in the event of a disaster, it could save you tens of thousands of dollars. Second-hand goods depreciate in value very quickly. This type of insurance is usually more comprehensive, but there are sometimes hidden price limits within the policy, so it’s worth researching before making a decision.

With only indemnity value cover to fall back on, if you’re faced with replacing a home’s worth of possessions, you could face a major shortfall between your insurance payout and the cost of the new items. However, the regular payments on this type of insurance can be significantly cheaper, if you don’t have extra funds to spare. Plus, value insurance still covers your essentials, and some policies allow for optional extras to be added for a premium, so you can protect other important belongings.

Related article: How Much Contents Insurance Do I Need?

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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.