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Types of Home Insurance

Home insurance is broken up in to 3 different components;

  1. Building Insurance covers financial losses associated with damage or loss of a property that you own. It covers the fixtures (e.g. plumbing, built in cabinetry), as well as the building itself. Think of turning your house upside down and anything that doesn’t fall out is counted as Building Cover.
  2. Contents insurance covers financial loss caused by the loss, theft or damage of your possessions such as household items, personal belongings (i.e. furniture, televisions, clothes, etc.)
    1. For Content items of high value, you can obtain Specified Contents cover. This is increased cover for items of higher value while inside the specified insured home. This option can often be taken with no extra premium applied and ensures you will receive the full value for your items.
    2. For Content items of high value that is being taken outside of the home then Valuable items cover is the ideal way of insuring the full value of your contents against a wider range of events, including accidental loss or damage at or away from your home and even overseas. This option generally incurs a slight increased premium but provides peace of mind that your items are fully covered.
  3. Legal Liability covers you for any illness, injury or death that is suffered by somebody on your property. Most policies will automatically cover up to $20m Liability within your policy

Now when you are obtaining Building and/or Contents Insurance there are 2 forms of cover that you can apply for with the majority of insurers;

  1. Listed Events, also known as Essential Cover is cheaper and offers you a basic range of protection for your building and / or contents against loss or damage against events such as fire or explosion, flood and or cyclone, storm surge and or lightning, earthquake, theft or attempted theft, rainwater or wind damage and impact. However Listed Events cover does not provide cover for any form of Accidental Damage by you.
  2. This is where Accidental Damage, also known as Premium Cover comes in. It offers you a broad range of protection for your building and / or contents against events such as cyclones, floods, fires, burglary and storm surge. It also covers against accidental loss or damage and often offers protection for your contents away from the home, Australia wide or elsewhere in the world, however some limits apply.

Now you know what type of cover you would like, the important part is knowing what Sum Insured you would like to cover. The Sum Insured is a figure that you must designate to the insurer. Whilst some insurers and website provide a “Building Sum Insured Calculator”, we often find these are over-inflated and not in line with current construction costs. You can either estimate the Amount Insured, or contact a valuer in your area to conduct a Building Replacement Valuation, thus reducing your chance of being underinsured in case of a claim.

Lastly, now you have the Sum Insured, you need to choose an Excess. The excess is the amount you must pay to make a claim, with the standard being $500. You can reduce your premium by increasing this excess, which can be very beneficial if you are not claiming each year. Your broker can provide quotes on varying excesses to see where your premium sweet spot lies.

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