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The devastation wrought by Cyclone Debbie reinforces the need for all home and commercial property owners to ensure they have adequate house and contents insurance.

But it’s not even catastrophic natural events that we all need to be covered for. It can be the simple things, like a leaking washing machine, a fallen branch or defunct hot water system.

What is house and contents insurance?

ASIC’s www.moneysmart.com.au describes home insurance (sometimes called building insurance) as insurance that covers the cost of rebuilding or repairing the home you own. Contents insurance covers the cost of loss or damage to your possessions, which can include things like furniture, clothes, computers, fridges, electrical equipment, tools, and jewellery.

These policies are often bundled together as a ‘home and contents insurance’ package, but they are actually separate policies that cover different things, so you need to work out what cover best suits your needs.

Types of insurance

There are two types of home building insurance. Make sure you understand the difference between them so you can decide which one suits you best:

  • Total replacement cover – includes all the costs of rebuilding your home to the standard it was prior to an event, so you don’t need to worry about any shortfalls between what it costs to repair or rebuild and the amount you are insured for. Having a total replacement policy will reduce your risk of underinsurance, but it’s only available from a few insurers.
  • Sum-insured cover – is more common and will cover you up to a set amount to repair or rebuild your home. This set amount is referred to as ‘the sum insured’. Some sum-insured policies also offer an ‘extended cover’ policy that provides up to 30% on top of the sum insured in the event of a total loss – this could be a good way to reduce the risk of underinsurance.

All insurance policies have exclusions, caps, limits and other conditions, which can vary between insurers, so it is important to ask questions and read the product disclosure statement when comparing different policies.

For more information on how to adequately insure your property and its contents, as well as compare policies, visit www.smartmoney.com.au

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