Home Insurance Home And Contents Insurance: How Do You Know If You Have Enough?

Home And Contents Insurance: How Do You Know If You Have Enough?

written by Shelley Marsh 03/09/2014
Home And Contents Insurance

This post is brought to you by Understand Insurance

Insurance is a funny product. It seems like a big fat waste of money until you need it. But when you need it, it then becomes invaluable. We bought our home six years ago. Like many people, our family home is by far our largest asset. However, our mortgage is by far our largest debt.

No-one wants to think about it, but what if something were to happen to our house? Without home and contents insurance we would be left with a small (and I mean teeny tiny) block of land in Sydney’s inner west and we would still be left to pay our mortgage. Yes, no couch to sit on, no TV to watch, no clothes to wear, no house to live in but our debt would still exist and the bank would still want its monthly repayment! For us it would be nothing short of financial devastation, throwing away everything that we have worked so hard for. Not to mention the stress and strain on our family would be unimaginable. That is why we have home and contents insurance.

However, recently when our home and contents insurance bill came in, I wondered if we had enough? You see, even if you have home and contents insurance, you cannot just set and forget, insuring for the same amount year in year out. Things change and the last thing you want is to get yourself in a situation where you need your insurance, but find out you do not have enough.

So how do you figure out how much home and contents insurance is enough? This is how I went about it …

Firstly, I split my home insurance and contents insurance into two separate decisions. Even though they are often bundled together, they are two separate things. Home insurance, covers loss or damage to the building you own. Contents insurance covers costs associated with loss or damage to your possessions.

How much home insurance do I need?

If we ever needed to rebuild our house there is more to it than just getting a pile of bricks and tiles and shoving them together. There are lots of costs involved, some of which you might not think about. Things such as the cost of clearing the land, alternative accommodation, architects fees (if needed) and fees for lodging plans to council. The costs really add up fast!

We used an online calculator to see whether our current level of insurance was roughly appropriate. It was pretty easy, they just ask you a few questions about your house and it gives you an estimate of how much it might cost to rebuild. (Click here to use the building calculator from Understand Insurance.)

The good news was the amount we are currently insured for was about right according to the Understand Insurance calculator ๐Ÿ™‚ Happy days! (Note: if you live in a high risk area such as a bushfire prone region, you might want to talk to the council and see if you are affected by new building codes should you need to rebuild.ย  This might increase your costs.)

How much contents insurance do I need?

Like most families we have a lot of contents!! Lots of it we probably don’t need. Anyway, for this component we went from room to room and wrote down what we would have to replace if something happened. Beds, couches, the TV, computers (yep, in a bloggy/gamer household we have more than one, it prevents fights!), clothes, the fridge, washing machine, dryer – the list was a bit endless!!! Then we simply estimated how much it would cost to replace all our major items on the list. It is surprising how much it adds up!!! To make the process even easier, you could use a household inventory check list such as the one from Understand Insurance.ย  Click here to see their inventory check list. This is the way I will be doing it from now on :-).

Another way to check how much your contents should be insured for is to use a contents calculator. Click here to see the one from Understand Insurance. We checked what the contents calculator told us, against our estimate and they were pretty similar. Happy days!

After using the above methods and having a good logical think about it all, I am pretty comfortable that we are adequately insured, should the worst case scenario happen. Now the key is not to just โ€˜set and forgetโ€™ our home and contents insurance. But to regularly review it and make sure we are correctly insured. As one day, we might just need it.

 

This sponsored post is brought to you by Understand Insurance โ€“ a financial literacy initiative of the Insurance Council of Australia, the representative body of the general insurance industry. To find out more about insurance and to use their calculators, visit their website here.

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Disclaimer:

The information contained in this post is general in nature and does not constitute financial advice.ย  Please see your financial advisor for advice specific to your individual circumstances.

 

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38 comments

Renee 03/09/2014 at 9:40 pm

I have found those online calculators really helpful in the past. It is such a scary thought to lose your house. You want to get it right!

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Shelley Marsh 04/09/2014 at 1:15 pm

Yes Renee – this is one you definitely want to get right and certainly not one to “set and forget”. Thanks for stopping by.

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Ellen 04/09/2014 at 1:43 pm

Thanks MM for this interesting post – and timely – I read this post immediately after reading the news about the building explosion in Rozelle. This sort of stuff can and does happen, and I am DEFINITELY going to do an insurance check-up now! (I hate to admit that I can’t really remember what kind of coverage I have!).Thanks again MM!

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Shelley Marsh 05/09/2014 at 6:18 am

Hi Ellen, yes what is happening in Rozelle is beyond heart breaking. I am glad you are going to do an insurance check up. It is so important!

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Lisa Marie 04/09/2014 at 4:01 pm

Couldn’t agree more with the importance of home and contents insurance. There are too many sad stories you hear of uninsured people losing everything! This protects all the material things! Our policy also covers us losing things away from home too (within reason)

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Shelley Marsh 05/09/2014 at 6:16 am

Hi Lisa Marie – I agree the financial consequences of not being insured are too horrible to imagine! Eeekkkk!!!

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Zuzana 04/09/2014 at 8:08 pm

I found some great tips here,although not living in Australia at the moment, I found some good advise which can be applied in any country,really.

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Shelley Marsh 05/09/2014 at 6:14 am

Hi Zuz, yes where ever you live home and contents insurance is really important. Thanks for stopping by ๐Ÿ™‚

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Bianca 04/09/2014 at 10:06 pm

Always love your practical advice Money Mummy! We’ve been trying to work out if we can make savings by cutting any of our many insurances, but home & contents is not negotiable! This has prompted us to check whether we’re covered well enough should the worst happen – thanks ๐Ÿ™‚

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Shelley Marsh 05/09/2014 at 6:13 am

No worries Bianca – I am glad you found it useful.

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ek 04/09/2014 at 10:42 pm

Yes property insurance is a must have. Then you have to hope you dont ever need it. Contents … we are prob under insured but guess you want to have enough to replace the fridge stove and get some clothes on your back. When I was single I went through it and seemed itd be less than 5k but its amazing the junk that you accumulate over the years. I suppose ive got more than one suit for work nowadays even if I don’t wear them.

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Shelley Marsh 05/09/2014 at 6:13 am

Hi Ek, yes when we went through our contents we found there was a lot of things that we probably didn’t need to replace but we made sure we had enough coverage to get us up and running again and then some. Yes I agree, I have a lot of clothes that never see the light of day ๐Ÿ™‚

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Andi 04/09/2014 at 10:59 pm

MM, I’m def going to check our coverage. Great advice.

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Shelley Marsh 05/09/2014 at 6:10 am

Thanks Andi – I am glad you found it useful ๐Ÿ™‚ It is so important not just to ‘set and forget’ when it comes to insurance

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Lydia C. Lee 05/09/2014 at 7:53 am

We basically doubled ours a few years back – we’d initially done it when we first got married…and had nothing.

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Shelley Marsh 07/09/2014 at 9:12 pm

Hi Lydia, good call, things change and so your insurance levels need to change with you. It is so easy to forget about it but it is super important!

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Marleisa 05/09/2014 at 9:43 am

I just doubled my contents insurance – as it was still at the amount I had before I was married and seeing as I added that we had added $10 000 woth of ‘things’ (new bed, new laptop, ipad and dinnerware) to the house in the past 6 months it was defiantely warranted!

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Shelley Marsh 07/09/2014 at 9:11 pm

Hi Marleisa, yes it is so important to change these things when your circumstances change. It is so easy to ‘set and forget’ whereas it should be something we should all think about every year just to make sure we are not exposed should the worst happen.

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Jody at Six Little Hearts 05/09/2014 at 11:57 am

Great post!
It can be so difficult to determine this. Insurance companies are not helpful either when it comes to questions. I just made up a figure of what I thought it would cost to replace everything – from food to garbage bins. It’s probably still short (or maybe over the top!) I just hope I will never have to use it – ever!

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Shelley Marsh 07/09/2014 at 9:09 pm

I am with you Jody – I am happy to continue to pay for my insurance but I am hoping that I never ever have to use it!

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Denise 05/09/2014 at 7:27 pm

I’m always a bit troubled by our contents insurance. I think we’re probably underinsured. I’m definitely going to use your calculator. I heard somewhere that most people are underinsured for both house and contents.

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Shelley Marsh 07/09/2014 at 9:08 pm

Hi Denise, I think you are right that being underinsured is a relatively common problem. It always pays to check your figures every year and make sure you are comfortable that they are right.

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Kirsty @ My Home Truths 05/09/2014 at 10:44 pm

I often worry that we haven’t got enough insurance, despite bumping it up a bit every year. I will have to check out the calculator to (hopefully) put my mind at ease!

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Shelley Marsh 07/09/2014 at 9:07 pm

Hi Kirsty, yes I found using the online calculators very comforting. It just gave me some extra reassurance that we were not totally off track in our numbers.

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Lauren @ Create Bake Make 06/09/2014 at 8:50 pm

When we built our house a couple of years ago we re-calculated our home and contents insurance. I was shocked (and a little scared) by how underinsured we had been for the eight or so years before. As much as I absolutely detest paying insurance, I know it’s a necessity.

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Shelley Marsh 07/09/2014 at 9:06 pm

Yes it is scary how many people are underinsured Lauren. It is so important to check and recheck your numbers and use an online calculator just to be sure. It is certainly one that you do not want to get wrong!

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Alicia 06/09/2014 at 9:07 pm

When you think about how much it would cost to replace everything in and including your home, you realise how important it is not to under insure. It would be so devastating to ever be in that situation.

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Shelley Marsh 07/09/2014 at 9:04 pm

Yes Alicia, the thought of loosing everything is completely horrifying!!! Or having insurance but not having enough would also be devastating.

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Sheridan Anne 08/09/2014 at 12:51 am

What a great point to make – about rebuilding a house! As someone who has been paying land off for two years and is about to start a build (hopefully) any day now, I know there is a LOT going into getting this house built from the ground up. Great post, Shelley!

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ann 08/09/2014 at 7:52 am

We are paying too much I think but I know from experience how much our house would be to replace plus all the contents so I am happy to have a little extra.
Great post!!

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Shelley Marsh 10/09/2014 at 6:22 am

Hi Ann – Thanks for stopping by! Yes sometime having a buffer can be a good thing ๐Ÿ™‚

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Grace 08/09/2014 at 3:39 pm

We found that we had to make major changes to our home contents insurance when the boys were born. I guess in several years we’ll need to reassess again.
And you’re right – insurance is one of those things you think is a waste of money but when something happens, you’re so glad you have it!

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Shelley Marsh 10/09/2014 at 6:23 am

Hi Grace – yes unfortunately when you need it insurance is worth every cent. I just hope we never have to need it ๐Ÿ˜‰

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Hope @NannyShecando 12/09/2014 at 9:33 pm

Eugh. It’s daunting to think that so much needs to be organised and managed, but oh so essential. Thankfully at the moment there’s just the 2 of us so it’s fairly easy.

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Shelley Marsh 28/09/2014 at 7:54 pm

No worries. Thanks for having me over for your spring time link up! It was fun!

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Marilyn 17/01/2017 at 2:45 pm

Thanks for the tips, was very timely help

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