The difference between building insurance and home contents insurance

It’s not uncommon for people taking out home insurance to get confused between home contents insurance and building insurance. We think both are important and necessary – not just because we’re in the business of insurance, but because we are in the business of ensuring that your home and the things that are precious to you are covered. Here we break down the two.

What is building insurance?

A building insurance policy covers you for environmental and accidental damage that might happen to the physical structure of your house and outbuildings.

Building insurance includes:

• Loss or damage caused by fire, lightning, explosion, earthquakes, the bursting or overflowing of geysers, equipment or pipes and storm or flood
• Damage caused by animals, vehicles and falling trees
• Malicious or intentional damage
• Break-in or theft – if that break-in or theft causes damage to the actual building
• Rent you lose if your tenant has to vacate the building as a result of damage by anything covered by the policy

Why is building insurance important?

Should the giant tree in your back garden fall down one stormy night and land on your house, the importance of building insurance becomes imminently clear. You are paying a small fee now, in exchange for the reassurance that your insurance company will bear the cost of a large loss in the future. If you are a homeowner, or are renting out a property, then building insurance is usually a condition included in the mortgage agreement, so not having this in place could put your bond at risk. As a landlord, building insurance is your responsibility, not that of your tenants.

What is home contents insurance?

Home Contents Insurance covers all the items in your house that you would take with you if you were to move. Replacing the contents of your home can add up to a huge amount of money. Precious items are vulnerable to loss, theft or damage, so it makes sense to insure them properly so you’re not faced with a large bill should something happen.

Home contents insurance includes:

• Cover for loss or damage to household goods and personal possessions
• Cover for loss or damage caused by fire, lightning, power surge, explosion, malicious damage, storms, bursting or over-flowing of geysers, equipment or pipes, break-in and theft
• Cover for food that deteriorates because of a power failure or if your freezer breaks down
• Cover for stolen washing and/or garden furniture
• Cover in the event of you and/or your spouse’s death if caused by fire or break in at your home
• Cover for your domestic employees’ or guests’ belongings (only if there is proof of damage caused by a break-in)
• Liability as a householder
• Tenants’ liability as a householder
• Liability to domestic employees, if he/she is injured or dies at your home while working

Which policy should you get?

If you own a house you need building insurance to cover the structure as well as home contents insurance for the personal belongings inside your home. If you own a flat, insurance can be more complicated. With Sectional Title it’s the duty of the Trustees to ensure that the Body Corporate is insured for the building, so speak to yours and find out exactly what your unit’s situation is. You will need home contents insurance for the items you keep inside your flat.