Contents insurance for beginners

Our stuff is worth more than we think it is and it can cost a surprising amount to replace everything in one go. Contents insurance is a great way to protect yourself and your property against the financial burden of unexpected damage or loss to your possessions, or damage you cause to someone else's property. Here's a breakdown of the benefits of contents insurance, how it works and the things you should consider before choosing your cover.

What are the benefits of having contents insurance?

Depending on the level of cover you choose, contents insurance can protect you against the unexpected costs of sudden, unforeseen and unintended damage or loss, and from specific events, such as burglary, fire, flood and natural disaster.

Contents insurance covers possessions kept in your home that aren’t part of the structure or building, such as furniture, jewellery, clothing and electrical goods, like your TV, computer and laptop. Some insurance policies also cover you when you’re travelling around New Zealand, so, should something happen to your laptop or jewellery when you’re on the road, you’ll be able to claim for it under your contents insurance policy.

Your insurance may also protect you against legal liability. If you accidentally damage someone else’s property, such as knocking over a television in a store, and you are held legally liable for the damage, your contents insurance policy may cover some of the cost. At AA Insurance, we cover you up to $2 million if you accidentally damage someone else’s property and are legally liable. Before purchasing insurance, it’s important to look closely at the policy wording and understand what’s included and what’s excluded.

Another benefit of having insurance is that your insurer may be able to assist you in getting things sorted after an event. At AA Insurance, our dedicated team of insurance specialists are on hand to ensure any damaged or stolen property covered by your policy is repaired or replaced as quickly as possible. They can also help you find temporary accommodation if needed so that you don’t have to worry about it.

How does contents insurance work?

A contents insurance policy is an agreement between you and your insurance company. You agree to pay an annual premium and an excess at claim time, and the insurance provider agrees to pay for damage when you make a claim, up to the limit of your policy.

A premium is the amount you pay fortnightly, monthly or yearly for your insurance. An excess is the contribution you pay when you make a claim, and your insurer pays the remaining costs to repair or replace your contents. You can come to an agreement with your insurer on these figures, but it’s important to remember that if you lower your premium by setting a higher excess, you will pay a higher excess amount at claim time.

When you take out contents insurance, you will need to set a sum insured, which is an estimate of how much it would cost to replace the contents of your home. It can be hard to figure out how much your stuff is worth; you can use this handy calculator, independently provided by Sum Insured, to help you estimate your sum insured. It’s also useful to keep the receipts, valuations and instruction manuals of your contents (especially high value items) and take photos of them, as they can act as proof of ownership at claim time and make your contents claim easier and faster to process.

If you do need to make a claim, there are a number of ways your contents claim can be settled. Your items could be replaced new for old, that is with a new, like-for-like item or the nearest equivalent item available in New Zealand. Alternatively, you could be paid the market value, which is the reasonable retail value of your asset immediately before it was lost or damaged. You can find out more about our contents insurance claims process here.

Once your claim is processed, your item may be repaired, replaced, or you may be given your settlement amount, which is the dollar amount you receive as result of your claim, minus your excess.

What level of cover is right for you?

Different insurance companies offer different kinds of cover to choose from. Your choice will determine what events are covered, how much you pay towards your premium and how your claim will be settled. It’s important to consider all these factors when purchasing a policy, to make sure you fully understand what you‘re covered for.

At AA Insurance, we offer two different options of contents insurance to allow you to choose the policy that best suits your situation:

• Contents Insurance - our most comprehensive policy, which provides cover for your contents if they are lost or damaged by a sudden, unforeseen and accidental event, as well as the bigger types of events which can happen, such as natural disasters. Optional extras can be added to your policy, including cover to reduce your excess for hearing aids or eyewear.

• Limited Contents Insurance - this type of policy may suit you if you only want to cover the events that are hardest to recover from, such as burglary, storm, fire, flood and natural disaster. Although this policy covers you if you accidentally damage someone else's property and are legally liable for the damage, it does not cover you for accidental damage to your own property, caused by yourself or others. However, optional extras can be added to your policy such as cover for mobile phones, laptops, and tablets.

You can find out more and compare our two contents insurance policies here.

Other things to keep in mind

Terms and conditions: before choosing a policy, make sure you familiarise yourself with the policy wording so that you understand the terms of the cover and its limits. Pay attention to limits on events, benefits and items, which are the maximum amount per claim that is covered for some categories. Another thing to look out for are the exclusions listed in the policy document.

Optional extras: insurance policies often have standard benefits that are automatically included with your policy, and optional benefits which you can choose to add on to provide you with additional cover at an extra cost. At AA Insurance, we offer optional extras such as excess-free hearing aid cover and $100 excess on your eyewear if you damage or lose your spectacles, sunglasses or contact lenses. On Limited Contents Insurance policies, mobile phone cover and laptop and tablet cover are available if you would like these items covered for accidental loss, damage and theft.

Discounts: it’s worth checking if any discounts are available to you. Sometimes, the more insurance policies you have with one insurer, the more discounts you may be able to accumulate, such as AA Insurance's Multi Policy Discount for customers who have more than one eligible policy.

Convenience: having all your policies (such as car, home, contents or landlord) with the one insurer can also make claim time less stressful, and if your claim is for the one event, you may only need to pay one excess. At AA Insurance, we offer our one event, one excess benefit across car, home and contents insurance policies so, if your car gets stolen with your handbag in it leading you to claim on your car and your contents policies, you will only need to pay one excess.

Your responsibility: contents insurance is designed to cover sudden and unforeseen damage, and most insurers will not cover damage that occurs over time, such as gradual damage and wear and tear. You must, at your cost and expense, maintain your contents in good repair, secure your contents and take reasonable care to prevent a claim.

Key takeaways

Contents insurance is a great way to protect yourself and your property against the financial burden of unexpected damage or loss to your possessions, or any damage you cause to someone else's property. You can work with your insurer to determine your premium, your excess and your sum insured, which is the value you insure your contents for. Different policies can offer different levels of cover with different optional extras, and this can vary from insurer to insurer. It’s important to look closely at what is covered and what isn’t when purchasing a policy to make sure you won’t have any surprises at claim time.