Insuring Your Home Contents
Sydney Morning Herald
Tuesday September 9, 1997
PEOPLE fork out huge chunks of money for household insurance at renewal time without thinking twice about it, because the alternative is too ghastly to contemplate. Comparing insurance products and premiums is a chore, but it can save you large licks of money.
While your current insurer may have offered you the best deal in town when you bought your home contents policy years ago, this may no longer be the case. Insurers regularly adjust their premiums and policies in response to competition and claims experience.
As the table shows, individual insurers have different risk ratings for different suburbs. One insurer may view your suburb favourably while another may not. The trick is to find the company that is glad to have your business at a reasonable price.
FAI regards Bondi as highly risky while GIO loads its Rose Bay premiums. Next year, it may be completely different again. Five years ago, Mercantile Mutual gave Paddington and Parramatta the same risk rating, but today Parramatta's premium is $270 less.
Changes are always in the air. Insurers may suddenly introduce new criteria that act against you. At the end of last year, the NRMA introduced age as a risk factor. While insurers have long offered retirees lower premiums, the NRMA has taken the concept further and introduced five age bands, with the youngest paying most.
The premiums for $60,000 general contents, for say, Elizabeth Bay, looks something like this: under 29 - $454, 29 to 45 - $441, 46 to 54 - $416, 55 to 59 - $380 and 60 and over - $358. This amounts to a difference of almost $100 between the youngest and oldest age bands.
On the flip side, the NRMA has changed the way its no-claim bonus applies, so you retain it even if you make one claim within the 12-month period that your policy operates. It's only after the second claim in a year that premiums rise by a third.
For years NRMA has generally offered the lowest premiums in town but, as the table shows, its main competitor, GIO, is now up to $200 cheaper in some instances. Again it serves to illustrate that you can take nothing for granted. (NRMA is also revising its rates on November 1.)
Although Mercantile Mutual is more pricey than others, in the survey, it offers wider cover and has more generous limits for valuables such as art, antiques and jewellery.
The NRMA allowance for jewellery, for instance, is just $1,000. If you want cover for higher amounts, NRMA requests you pay more.
Mercantile Mutual also covers higher amounts for stolen cash, cover for fusion of electric motors, higher personal liability cover (worldwide), visitors contents, replacement of locks and keys, death cover for the insured and a higher allowance for things left outside on the site.
Insurance broker Brock Halliday, a principal of Halliday & Nicholas, says policyholders have to decide whether they want basic cover, offered by the likes of the NRMA and GIO, or more extensive protection, such as that offered by AMP, Commercial Union and Mercantile Mutual.
"You get what you pay for. NRMA is good for the masses. If you have a fire in the kitchen or the roof blows off in a storm, you won't be sorry; it will cover you for most of the things that happen to your house," he says.
"But it's not adequate for people who have contents of significant value. If you buy art work for $150,000 and want it covered immediately, you won't get that from a basic policy."
All the insurers in the survey offer reinstatement and replacement policies or "new for old" cover. That is, they will reinstate you to the position you were in before the loss by replacing old items with new ones.
Therefore, when calculating the sum insured, you must take this into account and work out what it will cost to replace all your contents at current prices.
Generally, unless you insure your contents for a realistic amount, you will not be paid out in full in the event of a claim. NRMA allows for a margin of error of 20 per cent but, beyond this, will apply depreciation before settling your claim.
"If you underinsure by 20 per cent or more, it means you've paid a lesser premium than you should have and therefore the amount you get back will be adjusted accordingly," warns the Australian Consumers' Association's Gail Kennedy.
She recommends you reassess the sum insured at renewal time each year and be careful to include any new items ccquired during the year.
Mark Sheehan, a spokesman for the Insurance Council of Australia agrees. "If the true value of your contents is $100,000 and you insure for $10,000, it's logical you will get 10 per cent of what you insured for.
"You can't fill in the proposal form willy nilly. It's basically a contract and it should be filled in carefully."
He recommends you keep an inventory of what you have and update it regularly.
"It's a good idea to video all the things you have room by room to show you own them and, where practical, keep receipts as proof of purchase."
And he suggests these records be kept elsewhere in case the home is damaged by fire.
Policyholders often forget to include the contents of their garage and toolshed, things such as bikes, lawn mowers and power tools, he says.
Sheehan advises consumers to check on the definition of valuables - is photographic and sporting equipment, for instance, part of the definition? Check the limits that apply and what valuations are required, he says.
Most importantly, he urges consumers to read their contract and understand what they are covered for.
"While you are covered for water damage - that is, water coming through the roof or a leaking pipe - you are not covered for flood. It's important to read the contract."
BUYING TIPS
* Policies cover defined events: earthquake, storm, theft, malicious acts, riots, fire, impact damage, oil leaks and escape of water. Accidental damage costs more.
* Check discounts, especially if you take contents and building cover together.
* Some policies include domestic workers' compensation; others charge $10 to $20 extra.
* Similarly, some cover fusion of electric motors, others offer it at additional cost.
* Ask under what circumstances contents will be depreciated.
If there is a no-claim bonus ask how it works.
* Fill in the proposal form carefully and keep your inventory up to date.
* Your claim may be refused if you do not take care to protect your contents.
* Some insurers ask you to notify them if you are away for more than 60 days.
* Be aware that the policy is not a maintenance contract. If in any doubt, ask.
PERSONAL LIABILITY COVER: Covers you and your family for damage done to other people or their property
DEPRECIATION: Writing down the value of goods to reflect their age
THE ANNUAL COST OF $60,000 HOME CONTENTS INSURANCE
GIO NRMA*
MERCENTILE MUTUAL FAI
Balmain $301 $369
$685 $419
Bondi $301 $441
$605 $629
Chatswood $244 $300
$367 $356
Elizabeth Bay $244 $441
$515 $503
Hornsby $217 $237
$367 $293
Kilara $244 $300
$367 $356
Leichhardt $301 $369
$685 $503
North Sydney $244 300
$469 $356
Paddington $244 $482
$685 $503
Parramatta $340 $369
$415 $419
Penrith $217 $300
$415 $419
Rose Bay $402 $482
$469 $503
Strathfield $301 $403
$367 $356
St Ives $217 $237
$367 $293
Sylvania $217 $274
$415 $419
* reflects rates for policyholders aged 29 ti 45. Premiums for younger people
are higher and those for over 45 are lower.
Premiums reflect 'new for old' policies in the Sydney metro area with a $100
excess
© 1997 Sydney Morning Herald
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