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What does home insurance cover?

Mark Bristow avatar
Mark Bristow
- 8 min read
What does home insurance cover?

Usually, home insurance will cover any damage caused by unpredictable incidents, whether natural or as a result of humans. Depending on the insurer, having home insurance can also mean you have access to temporary accommodation while repairing or renovating your property after making a claim.

Most policies include the following kinds of coverage:

  • Fire damage insurance, which compensates you for damage caused by fire including bushfires and sometimes even the smoke and ash.
  • Theft and attempted theft covers any damage to your property caused by burglars breaking into your home.
  • Water damage covers damage caused by the bursting of storm pipes, or stormwater entering your home. You should remember that seepage and leakage are not covered, while flood damage may only be offered as optional coverage.
  • Malicious damage, including vandalism and rioting, covers damage resulting from a commotion in your neighbourhood or attacks by vandals.
  • Hail storm damage covers damage to the roof or walls of your home caused by hail.
  • Lightning damage covers power surges and other damage resulting from a lightning strike. You may need additional fusion damage cover if any motor wirings are burnt, and not all types of electrical damage may be covered.
  • Accidental damage covers unintentional breakage of glass, ceramics, or sanitary fittings. Some insurers may ask you to buy additional coverage based on the items you have in the house.
  • Earthquake damage covers damage caused by tremors and earthquakes.
  • Tree damage coversthe cost of repairs needed if a tree or its branches fall on your home. 

You should remember that home insurance only covers the physical building that forms your home, as well as other permanent structures, fixtures or fittings on the site. This might include garden sheds, fences, in-ground swimming pools, garages, built-in wardrobes and even light fixtures. You’ll need a separate contents insurance policy to cover the possessions inside your home.

What is covered by home and contents insurance?

Home and contents insurance covers the personal possessions located inside your home in addition to the house and other fixtures. While it’s possible to bundle your home and contents insurance together, many Aussies don’t realise that the two are separate policies.

While your home insurance should cover damage to your property as detailed previously, your contents insurance policy may cover damage to items in your home such as furniture, white goods, appliances, electronics and jewellery.

If any insured belongings are lost or damaged, you can file a claim with your insurer to cover the costs of getting the items fixed or replaced. If your claim is approved, the insurance company may either:

  • directly pay a contractor to repair or replace the covered contents; or
  • reimburse you the repair or replacement costs.

Home and contents insurance policies may not, however, cover damage to or loss of belongings when taken out of the home, or the belongings of people visiting your home. Also, the coverage limit for various items can vary from policy to policy. A basic home and contents insurance policy may be more affordable, but the coverage is limited, so it’s best to read your insurer’s PDS.

As with home insurance, you can buy optional accidental damage cover and widen the financial safety net for your home’s contents. However, remember that wear and tear to any items aren’t part of most policies’ coverage. 

If you frequently carry personal belongings outside the home, consider buying the optional cover often referred to as personal effects insurance or portable contents insurance. Some of the items that may be covered by a personal effects policy include your handbag, jewellery, camera and smartphone.

Do you need home insurance?

If you own a home in Australia, buying home insurance is recommended, though it’s not an essential requirement like Compulsory Third Party (CTP) insurance on a car. If you’ve taken out a home loan, the lender will likely require you to purchase home insurance before you move in.

It’s important to take good care of your home and maintain it well. If your insurance provider determines that damage to your home was because you didn’t do a good job looking after your property, your insurer may refuse to pay for the damage.

If you’re renting your home, there’s no need to worry about home insurance as it’s generally for home owners only. However, contents insurance is an option worth considering for renters.

Keep in mind home insurance doesn’t cover strata-titled apartments or units. The complex’s body corporate would take care of building insurance in most cases.

Exclusions and limits

Just because you’ve paid for insurance, it doesn’t mean you’re covered for everything. Generally speaking, only damages or losses caused by an insured event are covered. 

Let’s say your home and contents insurance covers storms and your house and many of its contents are damaged by rainwater. In this case, you may be eligible for a claim. But if you don’t have accidental damage cover under your contents policy and your dog destroys your new laptop, the insurer won’t pay you for a repair or replacement.

Even if you’re insured for a certain event, the exclusions in your policy will help determine whether the insurer approves your claim.

In most cases, there are limits on the amount an insurance provider will pay to repair or replace your property or its contents. For example, imagine your insurer’s maximum claim limit on insured jewellery is $1,000 per item. If your diamond ring is worth $3,000 and it gets stolen during a burglary, the insurer may only pay $1,000 to help replace it, given that your claim is approved.

If you’d like to insure the diamond ring for $3,000, you could consider taking out extra cover for the valuable by listing it within your policy. It’s likely that you’ll be required to specify its value and description when doing this. Bumping up your cover amount may increase the cost of your policy.

This is why the cheapest cover is not necessarily the best insurance. Aside from a policy’s premiums, it’s important to compare the insured events, exclusions, limits and excess of multiple insurers before you take out any cover.

What your insurance covers depends on your insurer and the policy you have, so you should always read over your PDS or reach out to your insurer if you’re unsure of what your policy covers. 

How to find and compare home and contents insurance

1. What do you need?

Before you start comparing insurance policies, make a list of your needs. What type of coverage do you require for your home and its contents? Do you live in an area prone to bushfires, for example? 

2. Gather quotes from multiple providers

Now you know what you need, you can gather quotes from multiple insurance providers using RateCity’s helpful comparison tables. Simply filter for the type of insurance you want and view a range of options side by side. 

3. What is the coverage?

Now you know what home insurance should cover, you should be able to view the policies of various home insurance options to see which one best suits your needs. For example, if a policy doesn’t include water damage as standard, this may be something that you’ll need to pay extra for. 

It may be worth reviewing the following factors:

  • How much coverage does the policy offer for your home's structure?
  • How much coverage is provided for your personal belongings?
  • What options are there for additional coverage, such as emergency accommodation if needed, or coverage for specific items (e.g., jewelry or electronics)?

4. Compare premiums

A key factor to compare when choosing an insurance policy is to look at the premiums and how repayments may compare to your budget. For example, if you need to keep costs down, a low monthly premium payment may be preferable. However, a lump sum premium payment made annually is typically cheaper than monthly payments

Also, if you need a higher level of coverage or request an extra outside of the standard policy, this may increase the cost of your premium. 

5. Compare excess

It's crucial to also compare the excess amount for each policy. A higher excess can lead to lower premiums, but it also means you'll need to pay more out of pocket in the event of a claim, so finding the right balance between excess and premium is key to selecting the most suitable policy.

6. Read the fine print

Carefully read the product disclosure statement (PDS) to understand the terms and conditions, including any limitations or special requirements. 

Compare home insurance

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 4 Mar 2024