RateCityRateCityAug 27, 2020(2 min read)

Your home insurance premium is what you pay your insurance provider for covering your home under their home insurance policy. It is calculated based on the type of coverage you choose for your home as well as any additional coverage you buy for either your possessions or specific incidents. Your premium can either be paid annually or in smaller instalments. 

Your home insurance policy may cover the total replacement cost, which is the actual expense of rebuilding your home from scratch. Alternatively, it can cover an insured sum, which is a predetermined estimate of what it might cost to rebuild your home. You’re more likely to pay a higher premium for total replacement cover than for insured sum coverage.

Apart from selecting your coverage, you’ll have to figure out your excess, which is the amount you pay out of your own pocket for each insurance claim. If you are okay with paying a higher excess, your insurance premium may be lower. Conversely, if you choose a lower excess, you may pay a higher premium. 

Your insurance premium can also be higher if you live in an area prone to incidents like floods, bushfires, or theft, as insurers are more likely to receive a higher number of claims in such neighbourhoods. 

If you also want to buy insurance for your belongings, a combined home and contents insurance policy may have a lower premium than paying premiums on separate policies for your home and your belongings. 

Related FAQ's

Can you transfer home insurance?

When you sell your home, you cannot transfer the home insurance policy to the new owner. The buyers need to purchase a new home insurance policy where the insurer will calculate the premium based on several factors.

The risk of any damage to the home is transferred to the new owners when you sell the property. You can speak to an experienced conveyancer or solicitor to find out more about when the risk gets passed to the buyers in your state or territory.

If you move to a new home

Can you transfer home insurance to a new property if you move to a new home?

Some insurers may allow you to transfer your policy to a new property as long as you meet certain conditions. These include informing the insurance company as soon as you enter into a contract to buy the new home. You may need to pay an additional premium when transferring your existing home insurance policy to the new property.

What is a home insurance premium?

Your home insurance premium is what you pay your insurance provider for covering your home under their home insurance policy. It is calculated based on the type of coverage you choose for your home as well as any additional coverage you buy for either your possessions or specific incidents. Your premium can either be paid annually or in smaller instalments. 

Your home insurance policy may cover the total replacement cost, which is the actual expense of rebuilding your home from scratch. Alternatively, it can cover an insured sum, which is a predetermined estimate of what it might cost to rebuild your home. You’re more likely to pay a higher premium for total replacement cover than for insured sum coverage.

Apart from selecting your coverage, you’ll have to figure out your excess, which is the amount you pay out of your own pocket for each insurance claim. If you are okay with paying a higher excess, your insurance premium may be lower. Conversely, if you choose a lower excess, you may pay a higher premium. 

Your insurance premium can also be higher if you live in an area prone to incidents like floods, bushfires, or theft, as insurers are more likely to receive a higher number of claims in such neighbourhoods. 

If you also want to buy insurance for your belongings, a combined home and contents insurance policy may have a lower premium than paying premiums on separate policies for your home and your belongings. 

Can you claim home insurance on taxes?

In most instances, you cannot claim home insurance as an expense on your taxes, because homes are used for personal purposes. However, according to the Australian Taxation Office (ATO), you may claim some portion of the home insurance expense if you use your residence to run your business. For example,  if you have a home office, you can deduct the percentage of expenses that were allocated to the home office. 

Remember that not every room that has a desk is considered as an office. Any office, garage, or other free-standing structure devoted to your business is eligible for the deduction as long as it is your primary place from where you operate your business. 

How do you compare home insurance rates?

When you compare the home insurance quotes offered by various Australian insurers, consider looking at the type of coverage they offer as well as coverage limits and exclusions. You can choose an insurance policy which covers either the total replacement cost, which is the actual cost of rebuilding your home from scratch, or a fixed insured sum, which is an estimate of the cost to rebuild. The home insurance policy is likely to cost you more if you go for the total replacement cost coverage.

Your insurance policy’s exclusions and coverage limits usually depend on how exposed your home is to adverse events like floods and bushfires. It also tells you the maximum compensation that your insurer is likely to pay for damage caused to your home. If you live in an area with a greater incidence of crime or disasters, your insurance policy will likely cost you more.

The amount you actually pay for home insurance can be adjusted by agreeing to a higher excess, which is what you will pay over and above the insured amount from your own pocket. You should consider using the online calculators provided by various insurers to check how different coverage limits affect your insurance premium.

What does home insurance cover?

What home insurance specifically covers and the extent of the coverage depends on the insurance provider and the individual policy. However, home insurance typically covers the property and other permanent structures found on or in the property, such as fences, in-ground swimming pools, garages, and dishwashers, to name a few.

There are usually two types of homeowner's insurance you can choose from, with "total replacement cover" or "sum-insured cover". 

If you’re not sure which option to take, it may be worthwhile to speak to a professional valuer to understand how much it might cost to rebuild your home and replace what's inside.

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 can be one of the factors required in the pre-settlement documentation for a home purchase, and you may be advised by either the bank or a broker (or both) ahead of settlement.  

Type of home insurance do I need?

There are two types of house insurance policies, namely total replacement cover and sum insured cover. The former covers the total cost of rebuilding the house to the same standard before it was damaged. The latter home insurance type covers the cost of damages up to a predetermined limit, which is called the sum insured.

Different types of homeowners’ insurance may offer extra cover at an additional premium, including accidental damage, fire insurance, storm insurance, flood insurance, motor burnout insurance, home and contents insurance, and contents insurance. These extras are not classified as homeowners’ insurance types; include one or more based on your situation. 

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