Home Insurance explained

Compare current home insurance offers, and find out when you need it, why you need it, and how to compare home insurance quotes.

- Last updated on 21 Oct 2020

To help you make a choice about Home Insurance, here are some options you can consider. These are some examples of what’s available in the marketplace from selected providers.

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Comprehensive Home and Contents Insurance

CHOICE Recommended 5 years in a row. Multi-policy discounts available when you take out two or more eligible policies. Pay fortnightly or monthly at no extra cost.

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Home Insurance

Protect your house. Reward yourself. Take out a Youi home insurance policy and get access to YouiRewards.

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ING Direct

Home and contents insurance

Breathe easier and save up to 30% on new policies when you combine home and contents insurance online

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Virgin Money

Home and contents insurance

Protection for every castle.

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Budget Direct

Home and Contents Insurance

Budget Direct's Home and Contents Insurance policy lets you tailor your policies to suit your lifestyle and your budget. So you can get cover you need at a price you can afford.

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What is home insurance?

Life can be full of surprises - you can never tell when things might go south. Purchasing adequate home insurance coverage helps you protect your most precious asset, besides giving you peace of mind when dealing with unforeseen events. When doing so, you should choose an insurance policy that protects your home as well as other fixed structures against all likely incidents. This may sound easier said than done, but you can compare quotes from various insurance providers to see what coverage they offer for various kinds of damages before deciding on the policy you want to buy.

Usually, home insurance involves two kinds of coverage: total replacement cover and sum-insured cover. 

Total replacement cover refers to the actual cost of replacing your house entirely, often by rebuilding, renovating, or repairing after heavy damage. This kind of home insurance policy will likely cost more, and possibly require extended negotiations with the insurer. 

A sum-insured policy covers a predetermined maximum cost to be paid by your insurer – the insured sum - in the event your house gets damaged. The insured sum often falls short of the actual cost of repairing or rebuilding your home, leaving you underinsured or having to pay for repairs out of your pocket.

When buying home insurance, it's a good idea to remember that home insurance only protects the structures that make up your home, not the objects that your home may contain. To protect these, you will likely need to buy home and contents insurance. You can purchase a single policy that covers both your home and its contents, or you can purchase separate policies covering each. Checking what the costs are for each as well as the coverage limits and exceptions can be useful in helping to decide between the two types of insurance policies.

What does home insurance cover?

What your home insurance policy covers and what it excludes can vary based on your provider, as well as the policy purchased. A home insurance policy typically covers your entire property, including permanent structures such as fences, in-ground swimming pools, garages, tool sheds, and walk-in wardrobes. The policy’s product disclosure statement (PDS) will give you a clearer picture of the covered incidents or damages, and the limits specified for each. The PDS will also tell you which incidents or contents are excluded and whether you need to purchase additional coverage.

There are usually two types of homeowners insurance you can choose from. The type you choose helps determine the level of coverage you will receive:

  • Total replacement cover – covers the cost to repair or rebuild your home to the state it was before the insured event occurred. You won’t find this option with every insurer and where it is available, you can expect it to be more expensive.
  • Sum-insured cover – covers your home to a maximum amount pre-determined by you. This is the amount that you estimate it would cost you to rebuild your home if it is destroyed or becomes a total loss. This is the more popular cover type, though it’s more likely for a homeowner to be underinsured with sum-insured cover.

If you’re not sure which option to take, it could be worthwhile to speak to a professional valuer to understand how much it might cost to rebuild your home.

It’s wise to review your property insurance policy regularly to make sure your house is adequately covered, particularly if you have renovated or extended your home.

Do I need home insurance?

No matter what any insurer suggests, buying home insurance is not mandatory unless it's a requirement from some other party, such as the case may be when taking out a home loan. 

By purchasing an insurance policy, you are effectively paying the insurer to worry about dealing with the cost of repairing or rebuilding your home if disaster strikes. If you are taking out a mortgage to buy a home, your lender may ask you to purchase home insurance, possibly before approving your loan application, though usually if you are purchasing a freestanding house, terrace, or semi-detached property. 

If you live in a strata-titled apartment or unit, the onus of purchasing insurance for the building falls upon the landlord or the body corporate managing the property. As a resident, however, you will need to check whether the policy covers the contents of the apartments. If not, you should consider purchasing contents insurance. Likewise, if you live in a rented apartment, you do not need to buy home insurance, although buying contents insurance may be wise.

How can you compare home insurance policies?

Home insurance policies are often worded in complex legal language and can sometimes feature complicated mathematical calculations which, as someone buying a home, you just have to deal with. Understanding the cost of home insurance typically means dealing with these, though, so you need to estimate the cost of rebuilding your home from scratch in case that eventuality arises. If you are choosing a home and contents insurance policy, you may also need to factor in the cost of replacing all your possessions. Your insurance policy should ideally cover both these costs, though you may want to account for a rise in costs and have some buffer for unexpected expenses. 

Luckily, computing this amount doesn’t require you to spend days running around your home with a calculator in-hand. Most insurance providers also offer convenient online home insurance calculators to help you compute the cost of replacing your home and belongings. However, since these tools are offered by insurance providers, you may want to get the numbers double-checked by an expert. Understandably, this calculation plays a huge role in calculating your insurance premium. 

An expert can also guide you with estimating the excess, which is the cost you pay beyond the amount claimed from your home insurance provider. As your insurer may also set limits on the maximum they will pay for different items, you will need to factor this into your calculations. You can then choose whether you're more comfortable paying a higher excess or paying a higher insurance premium and select the policy payment cycles based on whether you want to pay monthly or semi-annual or annual instalments. 

Besides the numbers, you should also compare home insurance policies to see which incidents are covered. Most Australian insurers offer coverage for damage from lightning storms, earthquakes, bushfires, and floods. Incidents like riots, arson, and vandalism can also be covered. Based on where you live, some incidents may be more likely, which can affect the coverage, as well as the amount you pay for your home insurance policy. Consider checking whether you need any additional and optional coverage, as it may help you in the long term. 

Armed with this information, you can compare home insurance quotes online before purchasing the policy of your choice from the comfort of your home.

What is contents insurance and what does it cover?

Contents insurance covers your personal belongings inside the home, including furniture, whitegoods, appliances, computer, jewellery, artwork, etc. The items may be covered if it is lost, damaged or stolen inside the home. However, it’s possible to take out extra cover for possessions that are taken outside the home, known as personal effects cover.

Homeowners and renters can take out this type of insurance for most types of properties, including houses and apartments. 

What is home and contents insurance?

Of course, insurance for your home only covers one side of what you might need, while contents insurance cover just what's in your home. If you buy a home and contents insurance policy, you can recover the cost of replacing any damaged possessions, in addition to the cost of renovating or rebuilding your home. This can include furniture, white goods, electrical appliances, computers, jewellery, and artworks. A home and contents insurance policy usually covers water and fire damage caused by accidents inside the home, as well as theft and vandalism. You can also purchase additional insurance coverage, called "personal effects cover" for possessions that you may carry outside the home. Insurers will also offer you optional coverage for any high-value items you may own. 

Purchasing a home and contents insurance policy may be a better approach in terms of balancing the coverage that's needed and premium payments. Before you purchase home and contents insurance, remember to compare insurance quotes online to find out how each matches against those for the combined policy before making your decision.

How much is home and contents insurance likely to cost?

What you pay for home and contents insurance can vary based on where you live and what your possessions cost in total. An insurer will gauge how often you might file a claim based on the kind of incidents that are likely to occur in your neighbourhood. If you live in a high-risk area where there is a greater incidence of bushfires, floods, or crime, your policy coverage might not be as extensive or could cost much more. You may be forced to choose between lowering your insurance payments and paying higher excess for some of the damages. 

Contents insurance policies may not play as nicely with important possessions such as collectibles or high-value jewellery, and you may need to spend more money to insure those valuables. It's worth considering whether buying separate insurance policies for high-value items can help lower the amount you pay for the home and contents insurance policy if the price is too high to justify. Alternatively, consider looking at specialist insurers for items such as jewellery if you are comfortable juggling multiple insurance policies and payments.

Ultimately, you shouldn’t choose your insurance policy based only on what you have to pay. If you look up home and content insurance reviews, many people realise after filing a claim that they may have overlooked an aspect of the insurance policy. It's always wise to read the fine print and carefully examine what your insurance provider is offering, compared to what they are offsetting or discounting.

Do I need home insurance for a home loan?

While home insurance isn’t necessarily a requirement for a home purchase per se, it’s likely that if you’re purchasing a home with the help of a home loan, you’ll need to take out home insurance on the property. Home insurance is one of the main factors typically required in the pre-settlement documentation, and you may be advised by either the bank or a broker (or both) of the need to purchase home insurance for the property ahead of settlement.  

Why you should review your home insurance policy

You should review your home insurance policy periodically to ensure that your house and your possessions are adequately covered. Regular insurance policy reviews can help make sure that your insurer has not added exceptions or changed the coverage limits, and keep your home insured. 

Such a review also helps you keep your policy up to date in terms of changes or renovations to your home. For example, if you decide to build a new tool shed in your backyard but your insurance policy doesn't cover it, you could lose out on coverage if the shed or its contents are damaged. Likewise, if you buy a home and contents insurance policy and acquire high-value items which are beyond the policy coverage limits, your insurance policy will likely require a similar update.

How do I compare home and contents insurance rates?

Much like comparing home insurance policies, choosing the right home and contents insurance policy requires you to understand what you expect from the policy and what various insurance providers will offer. While comparing home and contents insurance policies, try finding answers for the following questions, as this can guide you in choosing the policy you need: 

  1. What will it cost you to rebuild or renovate your home, and replace all your valuables? What percentage of this cost are you comfortable paying on your own? Which of the insurance policies that you are comparing adequately covers the difference? By answering these, you can rule out the policies that do not offer adequate coverage.

  2. Of the shortlisted policies, which ones are most specific in detailing the coverage limits for specific items? Which ones offer you protection against the most common risks in your neighbourhood? Selecting the more flexible, comprehensive policy is wiser.

  3. It's worth checking for conditions specific to you. For example, do these policies have any restrictions regarding the presence of pets in the house? 
    Check whether the insurance policy covers emergency support, such as temporary relocation while your house is being renovated. 

  4. Even if the policy you choose seems to offer thoroughly adequate protection, you may miss out checking some limits, conditions, or exclusions. Always read the insurance provider’s product disclosure statement (PDS) or confirm with the insurance provider before making your decision to purchase the policy.