Contents Coverage: Whose Insurance Pays?
If your personal belongings are damaged in an incident such as a flood or fire, whose insurance pays? If you are a landlord or tenant, you need different insurance to standard home and contents coverage for homeowners. Here, we look at the different types of contents coverage options and what you need to know.
Insurance for Tenants
When a disaster such as a flood or fire happens, it is often renters who miss out on compensation. This is because they are typically less likely to be insured than homeowners and/or they may have inadequate insurance.
Renter’s insurance is simply home contents coverage for people living in rental properties. In many cases, renters’ insurance is the same or very similar to a contents insurance policy. When applying for a quote for a contents insurance policy, you may just need to specify that you’re a tenant.
Like contents cover for homeowners, renter’s insurance typically covers tenants for financial loss from risks such as fire or burglary. It may also cover you for accidental damage to fittings and fixtures of the property you are renting and even damage to your belongings while you are moving between properties. However, there are low-cost renter’s insurance policies (and home contents covers) that only cover fire and theft. So, it’s important to understand exactly what your policy does, and doesn’t, cover, so you’re not left in the lurch when disaster strikes.
Insurance for Landlords
Landlord’s insurance can cover you for damage caused by disasters such as storms, fires or floods, but also for damage your tenants may cause to your property, as well as the loss of rental income if your property is vacant while repairs are taking place or if a tenant breaks their lease unexpectedly.
Strata Building Insurance
If you live in an apartment managed by a strata scheme, there are certain types of damage that may be covered by your strata (or building) insurance policy. This is an insurance policy shared by all owners and paid for out of your strata fees.
Broadly speaking, strata insurance covers the building and shared common areas. It typically also covers fixed elements of your apartment, such as pipes, hot-water systems, intercoms and air-conditioners. Note that strata laws and strata insurance differ by state. For example, in NSW strata insurance won’t typically cover paint, wallpaper and floating floorboards, while in Queensland strata insurance doesn’t cover air conditioning units.
Insurance for Owner Occupiers
Home contents insurance is a critical insurance for homeowners. It can help ensure your home, building and belongings are protected from damage caused by break-ins and burglaries, home fires or flooding.
However, too many Australians underestimate how much it would really cost to replace their entire home and contents should the worst happen and are under-insured as a result, which is why it’s often worth getting a professional opinion on what the actual cost of repair and replacement would be. The Insurance Council of Australia has a calculator that can help you estimate how much home contents insurance you need.
What about natural disasters, such as bushfires or floods?
Natural disasters, such as bush fires or floods, can be devastating enough without then finding out you don’t have enough insurance or can’t get insured due to previous disasters.
To find out if you live in a disaster prone area, you can talk to your insurer or check with the state and territory emergency services organisations in your state.
Most home and contents insurance policies cover storms, which are defined as rainwater that falls from the sky and usually includes rainwater run-off and overflow from storm drains.
For some policies, cover for damage caused by floods is optional. For example, floods caused by overflowing streams, rivers, creeks and dams due to rainfall or a rise in the water level.
Most home and contents insurance will cover you for damage caused by fire, including bushfire. Generally, a fire has to cause the damage, so you may not be covered for heat-related damage such as scorching and melting or smoke, ash and soot damage. For example, if your home is damaged by a nearby fire or bushfire.
Common exclusions from fire insurance include:
- A bushfire that occurs less than 72 hours after you bought your policy.
- Intentional fires.
- Accidental fires caused by negligence or recklessness.
- If your house doesn't comply with fire regulations, for example if a heater isn't installed properly.
As always, it is important to get professional advice and understand what your particular policy covers.
Have you got questions about your home and contents insurance? Callus anytime on (02) 8268 2900 for an obligation-free chat.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Please consider whether the information is appropriate to your circumstance before acting on it and, where appropriate, seek professional advice.