If you’re about to purchase a new policy and a bushfire, flood, cyclone or other disaster happens before you buy, any damages related to this event wouldn’t be covered. This is called a ‘known event’ or ‘named event’ and known events that occur before your policy begins aren’t covered even if they cause damage after the policy commences (such as a bushfire that burns for several days).
Furthermore, almost all home and contents insurance policies have an embargo or waiting period on certain defined events from the commencement date of your policy. Known events specified in your policy’s embargo (typically natural disasters) may not be covered until a set time after your policy first takes effect.
Insurers will typically offer two types of portable contents cover: unlisted (or unspecified) portable contents cover and listed (or specified) portable contents insurance cover. Many insurers include unlisted (or unspecified) cover as a standard inclusion on a home and contents policy up to a specified limit per item and/or group limit.
Unlisted (or unspecified) portable contents cover will provide coverage by way of a total sum insured for all items claimed over one event as opposed to itemising each belonging individually as you would for listed items.
Listed (or specified) cover will allow for certain items to be detailed to their full value or cost of repair or replacement. These will typically be reserved for high-ticketed or valuable items. This could be your expensive mountain bike, a laptop with valuable documents and work-related data and/or as you’re stepping out in your finest jewellery or dress watch, you will want to be covered should you damage them, or they are stolen from you. This additional cover would attract a higher premium.
If the cost to rebuild, repair or replace your home or the contents within it exceeds the sum insured on your policy (i.e., the specified monetary amount you’re covered for), you will likely have to pay any difference in costs out of your pocket. This situation is known as underinsurance.
To avoid underinsurance, it’s essential that you ensure the replacement value for your contents and the sum insured for your home’s structure would adequately cover the cost of completely rebuilding the home or replacing your contents. You may wish to update the sum insured regularly to ensure you’re never out of pocket. When setting your sum insured for the first time, you might find that free calculators online can help you determine a figure.
You should also take note of any sub-limits within your policy for certain categories of items; you may even have the option of increasing these contents sum limits for specific items, such as jewellery.
To safeguard the amount for which you have your home insured, some insurers may offer an optional extra sum insured safeguard otherwise known as an “underinsurance safety net” or “sum insured cover”. For most insurers this an optional extra to your home insurance policy whereby you are somewhat covered if in the event of underinsurance where the cost to rebuild your house exceeds the sum insured, leaving you to foot the difference.
With sum insured safeguard cover, for example, if you make a claim with your insurer and they determine that the cost to replace or repair the damage to your home exceeds your sum insured, they will increase your sum insured by a nominated percentage (usually up to 25% – 30%). Combine this cover with keeping your sum insured assessed for a more accurate amount consistent with quotes to rebuild your home, you should have peace of mind you will be looked after financially should anything happen to your home.
However, there are circumstances to rising costs for rebuilding that can be out of your control. Some trades will raise their rates following a major weather event due to the demand. This is hard to plan for. Some other insurance providers also offer “total replacement cover”, these policies agree to cover the cost to repair or rebuild rather than paying up to an agreed sum insured. This tends to be a more expensive option.
Appliances may be damaged by a power surge and burnout. This is covered by motor burnout cover, which is usually only available as an optional extra that you can add to your home insurance or contents insurance policy, depending on what you‘re looking to insure.
For example, a wall-mounted air-conditioner would be considered a fixture of the house and would be covered by home insurance, whereas a washing or drying machine that you bring with you into the home falls under contents insurance.