Stuffing up over stuff
Making mistakes with your contents insurance is all too easy – and costly, writes Rob Stock.
Stuff costs money to buy, and stuff costs money to own. Costs include owning, or renting places to keep it. There are also costs to maintaining stuff. And generally stuff has to be insured in case burglars break in and steal it, or its destroyed in events like a fire, flood, or earthquake. But many people stuff up their insurance, leaving their stuff at risk.
Too little cover
A family who have lived in a home for decades may have bought, inherited and been given an amazing amount of stuff.
Insurers like AA Insurance provide online calculators to help people work out what their stuff is worth. It’s estimate for an ‘‘average’’ home is $87,635. For an above average home it is $259,370.
AMI’s estimates are $75,437 for an average home, and $138,985 for an above average one.
The average across all of AA Insurance’s policies is just over $72,000. It’s only that high because of automatic inflation adjustments.
People remember to count obvious things like phones, TVs, and computers, but forget to count things like cutlery, bedding, towels, and clothing.
Fortunately, total losses from things like fire are rare, so it is rare that people find they ‘‘max out’’ on their cover limits.
I’m covered for what?
If you don’t know what you are covered for, you may fail to claim for something you could have. If you lose an item while outside the home, it may be covered.
Similarly, liability cover included in your policy can pick up the tab if your dog runs out into the road and causes a BMW to crash into a lamp post.
AA Insurance says your legal liability for accidentally breaking something in a store is covered under its contents policy, and so is your child accidentally causing damage somewhere they are staying, such as at boarding school or university residence.
‘‘Occasionally there are a few people who are disappointed if they thought they had more cover than the policy specifies,’’ says AA Insurance’s Amanda Fifield.
‘‘A couple of exclusions that often come as a surprise, yet are listed in your policy, are gradual damage, and intentional damage and those items that have been removed from the home, i.e. gear you’ve stored in your friend’s garage.’’
You will co-operate
Policies obligate you to do certain things after a loss event like a burglary. Fail to do them, and you could undermine your claim.
The insurer will want many things, including proof of ownership for items you claim for.
You agree to help your insurer investigate whether you are lying to them and padding your claim.
That can mean giving its investigators access to things like electronic documents and bank statements. They may, for example, want to see when a photo has been taken.
Home and away
Some policies do not cover your stuff in a burglary, if it happens in a period where you were away from home for more than 60 days.
Others will, but will charge a higher excess. Policies may also require you to tell insurers when you are going to leave your home unoccupied for a lengthy period.
Slips of the memory
When taking out insurance you must tell insurers everything they want to know, including any past convictions, or whether you have ever been turned down for insurance. Failure to do so can invalidate your insurance.
Valuable stuff
‘‘Forgetting to specify things like jewellery, art, expensive bicycles or cameras is more common than you’d think,’’ says Fifield.
‘‘While these items will still be insured if they are lost, stolen or damaged, the amount of cover will be up to the ‘event limit’ set by your insurer, unless they are noted separately on your policy.’’
AA Insurance’s event limit for cameras, for example, is $5000, unless you ask the insurer to ‘‘specify’’ them for their actual value, which will result in you paying a higher premium.
Record-keeping proof
Some clear close-up photos of your things is a good way of proving ownership.
AA Insurance advises people to upload images to their email. Keep relevant receipts also, again in a secure place, perhaps scanning them and uploading the images to your email.
Online banking does mean that proof of payment can be easily established for larger items.
Updating cover
If you splurge on new stuff, you need to consider whether you should lift your contents cover.
Fifield says: ‘‘If you’ve purchased anything significant, maybe a big piece of sports gear, dining table, or a new TV, it’s a good time to check whether you need to update the sum insured amount for your contents policy.’’
Claim limits
Policies often limit individual claims. For example, claims for spoilt food caused by power cuts are limited to $1000 under AA Insurance’s policy.
Insurers limit claims on cash. AA Insurance will only pay out up to $500. It’s just too easy to claim money was lost in a fire.
Cash-like items may not be covered at all. AA Insurance won’t pay claims for lost coupons, or lottery tickets, and will only pay up to $1000 for bullion or uncut gemstones.
Taking reasonable care
Locking doors and windows is taking reasonable care. But not everything can be replaced.
Heirloom jewellery, for example, is irreplaceable, even after an insurer pays you some money after a burglary.
There is no insurance cover for data lost with electronic devices, so backing it up is sensible.