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How to choose the right home insurance

Vidhu Bajaj avatar
Vidhu Bajaj
- 6 min read
How to choose the right home insurance

Buying a house takes careful planning, but the journey doesn't stop there. Keeping your house in good shape requires ongoing commitment, and unexpected surprises can pop up despite your best efforts. 

Natural disasters like floods and bushfires, as well as theft, vandalism, and accidents, are potential threats you should be ready for. These incidents can cause a lot of damage to your property and belongings. Having the right home insurance can help cover the potential costs of fixing or replacing these things, giving you peace of mind.

How do you go about finding the right home insurance policy for you?

There are two important aspects to consider when buying a home insurance policy - the cost of the insurance and what you're covered for. With insurance prices increasing substantially over the past year, the cost is an important consideration for homeowners. However, it's essential to keep in mind that all insurance policies don't offer the same features.

When you're getting a home insurance policy, it's vital to take a closer look at what exactly you're signing up for. This means you should compare policies from different insurance providers to understand what's included and what's not, and to what extent. A thorough comparison can guide you towards finding a policy that's designed to meet your specific needs while being affordable, too.

What to consider when comparing home insurance policies

When you're looking to buy home insurance, one of the first things to think about is how much coverage you need. It's a good idea to aim for a level of coverage that's close to the cost of repairing or replacing your house. Additionally, you may also want to consider the features and items in your home that might be expensive to repair or replace. 

While home insurance usually covers the fixed structures in your house, if you want to purchase insurance for your belongings, you could consider a home and contents insurance policy. Again, make sure to check which items in your house are covered under the policy because some insurers might require you to purchase add-on insurance for some high-value items. Additionally, you can consider the following points when comparing home insurance policies to protect your house against potential mishaps adequately.

Decide between total replacement cover vs. sum insured cover

When choosing a home insurance policy, you need to decide whether you'd like it to cover the total replacement cost of your home or a predetermined "insured sum".

The first option involves providing an estimate of what it might cost to renovate or rebuild your home after a disastrous event which is covered by your home insurance policy. Since this type of policy covers actual costs, and there isn't a predetermined maximum limit on the coverage, you are less likely to be underinsured. Such a policy might also cover any rise in rebuilding costs over time, which is essential to factor into your estimate.

Alternatively, you can provide an estimate, called the insured sum, of the maximum cost of rebuilding your home and buy a home insurance policy that covers this amount. If the actual rebuilding cost exceeds the insured sum, you will end up being underinsured as your insurer is unlikely to pay the increased costs. As your insurance policy's coverage already takes into account the excess you've agreed to pay, you end up bearing a greater share of the renovation expense if the insured sum falls short of your estimate.

Check the inclusions in your policy

Most home insurance policies provide some amount of coverage against various natural disasters and acts of theft and vandalism. However, depending on where you live, this standard coverage might not be enough to protect your home against specific threats. For instance, if you live in an area prone to floods, you might want to choose a policy that includes flood coverage to protect against potential damage. But some insurers may not offer flood coverage as a standard inclusion in areas that are extremely flood-prone, or they may charge you a very high premium. 

To better assess your requirements, consider asking your neighbours about their insurance policies since they will require a similar type and level of coverage. Long-term residents of your area may know more about the various factors affecting local home insurance rates as well as the frequency of disasters like floods or bushfires. Your local council office may also be able to provide this information.

Apart from the location of your house, consider its condition when buying an insurance policy. For example, if you're buying home insurance for an older property, you may need to purchase additional coverage for potential issues due to plumbing or wiring defects.

Consider the excess

The excess is the amount you need to pay out of pocket when making an insurance claim. It's essential to understand how much excess you're comfortable paying and how it affects your premium.

Typically, if you choose a policy with a higher excess, your premium might be lower. However, make sure the excess is an amount you can afford in case you need to make a claim.

Get quotes from multiple insurers

Once you have an understanding of the incidents your home insurance policy should cover and the amount of coverage you need, you can compare home insurance quotes online to see which insurance policies meet your requirements.

The cost of home insurance depends on various factors, such as the age and location of the property, the level of home security, and the extras or add-ons you need. How you choose to pay your premium may also affect the cost of your home insurance. Some insurers may offer a discount if you pay annually instead of making a quarterly payment. By comparing home insurance quotes from multiple insurers, you can find a policy that provides the right level of coverage for your needs at a reasonable price.

Before finalising on a home insurer policy, it's advisable to read the insurer's Product Disclosure Statement (PDS) to get a better idea of their limits, exclusions, and the kinds of damages they cover. This can help you gauge the comparison more accurately and spot any variations between two quotes more quickly. 

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Product database updated 04 Mar, 2024

This article was reviewed by Personal Finance Editor Peter Terlato before it was published as part of RateCity's Fact Check process.

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product data updated on

Product data updated on 4 Mar 2024