Does COVID-19 affect home and contents insurance?

As COVID-19 and the ensuing lockdowns have seemingly affected almost every aspect of our lives, many are concerned about how their home or contents insurance may be impacted.

Homeowners and tenants who are worried about surging premiums in a pandemic environment can rest assured that home and contents policies are largely unaffected by COVID-19. That’s because it’s not likely that COVID-19 would be directly responsible for events covered by a typical policy, such as residential property damage or loss, or damage and theft of possessions, according to an Allianz Australia spokesperson. 

IAG has also not made any changes to its home building and contents insurance policies due to the pandemic.

“Pandemics are not a listed event that we provide cover for as outlined in our product disclosure statement (PDS) and a pandemic would not cause loss and/or damage to property which is covered under a home building and contents policy,” an IAG spokesperson said, adding that it was possible for customers experiencing financial hardship to access premium reductions and deferrals. 

Lisa Kable, communications manager and spokesperson for Understand Insurance, pointed out that while circumstances have changed, but not all risks have changed due to COVID-19.

“There hasn't actually been a change by insurers because the risk of maybe being burgled has reduced, but the risk of inadvertently leaving a candle burning and having a fire or using heaters or dryers more may increase that risk, so it balances (unexpected risks) out,” she told RateCity.

“There's still risk there, they fall under the same risk bucket that when you took out your policy, but they may have tipped in scale one way or the other.”

Things to note about your home and contents insurance during COVID-19

While most home and contents insurance haven’t directly been affected due to the pandemic, there are still a handful of things homeowners and tenants should be aware of about their policies.

1. Cleaning costs

If a visitor to your home has contracted COVID-19, you may be considering hiring a professional to clean your home. While Allianz Australia has confirmed its home and contents insurance doesn’t cover the cleaning costs for properties if someone has COVID-19 onsite, not all home and contents policies across the board will be the same. It’s best to review your product disclosure statement to understand how you’re covered.

2. Working from home

Work equipment provided by your employer and not personally owned by you may not be covered by your own contents policy. But it’s also possible that employer-provided items may be covered by the organisation, even after it has left the employer’s premises. Organisations may have different types of insurance for items that they own, so you won’t know for sure until you check with your employer and your own insurer to find out the details.

3. New purchases

Many households may have purchased new items to use for remote working or leisure at home, and these may be covered under your contents policy. If you’ve bought high-value items, such as laptops or computer monitors, it’s worth checking your contents insurance policy to see what the value is in terms of unspecified goods. You may also want to consider whether you should specify the goods, or even increase the sum insured. 

“By ensuring your policy is up-to-date, you can be confident in the knowledge that if the worst does happen, you have adequate cover to protect what matters,” according to Suncorp Group spokesperson James Spence.

Additionally, if you’ve been out and about with these items, it might be a good idea to think about taking out portable contents insurance to protect valuable items outside the home.

4. Moving away from home

For anyone who has moved from their permanent home to their holiday home or back with their family during the pandemic period, you may need to be aware of the unoccupancy period of your covered home. This is typically 60 days, though some insurers have extended the vacancy period in light of COVID-19. Ms Kable advised anyone who has left home for 60 days or longer to check in with their insurer, particularly given parts of Victoria has begun its six-week lockdown.

5. General review

As we spend more time at home, getting to know your home and contents insurance may be important for anyone concerned about their financial safety nets. Ms Kable suggested anyone who has a building and contents policy to do a pulse check on their policy to see what’s covered and what's not covered. Comb through your PDS to understand your policy’s level of protection.

She also advised Australians to do an inventory of everything they own and think about whether they're insured to the correct amount. This might involve scanning around each room and doing a calculation of how much it would cost you to replace everything. Some belongings which may not seem to be worth much, including costume jewellery, handbags, shoes and linen, may easily add up to thousands of dollars. Consider using a calculator to help with this. 

“The last thing we want is for people to be underinsured. It would come as a very rude shock when you have to replace items,” Ms Kable said.

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Learn more about home insurance

Are bikes covered under home insurance?

Ordinarily, home insurance only covers damage to your house, which can include additional buildings such as garages, sheds, and fences, as well as permanent fixtures. 

However, to protect the items located in your home or in any of these other buildings, you will likely need to purchase home and contents insurance. Even so, your bike would only be covered if it does not require separate vehicle registration, as is the case for bicycles and 50cc minibikes, but not motorcycles, and only when located on your property, parked or otherwise. 

Depending on the cost of your bicycle or minibike, you can have it listed in your home and contents insurance as a high-value item. You'll want to check your insurer’s Product Disclosure Statement (PDS) to know the normal coverage limit for a bike included as part of your home and contents insurance, as well as the incidents which are covered. 

Insuring your bicycle can be distinct to insuring any personal effects on your bike at the time, or even using the bike when you're out and about. If you want to cover those, such as something in a basket or a camera equipped to the bicycle, or the bike itself as you travel, you will likely need to purchase additional personal effects insurance. You can also read about any additional coverage available under the personal effects policy, though for full coverage, an ideal option will likely be a separate bike insurance policy.

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.  

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. 

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.

Does home insurance cover termite damage?

It is unlikely that the average home insurance policy will cover damage caused by termites, mice, or other vermin, which are typically the result of negligence. For instance, water may have seeped from a heater or washing machine and dampened the woodwork in your home, attracting termites. Since termites usually build colonies, you’ll need to deal with the existing infestation and also take preventative steps to prevent future termite damage.

Treating your home for termite damage can be quite expensive, and you’ll likely have to make significant repairs depending on the size of the infestation. You may want to check if your neighbours have also had termite damage issues, and consider taking more long-term measures to keep termites away.  For example, you could install a chemically-treated soil barrier or baiting station, both of which may be effective for a few years. 

Consider inspecting your home  for any leakage or seepage from time to time, especially in the flooring or the outer edges of your home, as a precaution against damage by vermin. You may also want to consider hiring a pest control professional who can inspect and treat your home to protect against termites.

Is hail damage covered by home insurance?

If storms are among the incidents covered by your home insurance policy, hail damage protection is more than likely assured. While all policies differ based on your needs and what a home insurance provider will offer, some things are close to a certainty. 

Extreme weather events tend to be unpredictable in their severity, but dangerous all the same. You'll never be able to fully prepare for any damage caused, be it lightning, strong winds, rain leading to flooding, or hailstorms, but home insurance can at least provide you with a way to deal with life's unpredictable nature. 

If your home suffers from hail damage, you can file a claim with your insurer. In the event that this happens, remember to take pictures of any hail damage as an insurance adjuster will need to evaluate the impact on your home. Any additional wind damage to your roof will also need to be documented similarly.

You may want to check if your home insurance also covers hail damage to the cars parked on your property, and then file the claim for the total damage caused by the hailstorm. Once your claim is approved, your insurer should offer you either a cash settlement or refer you to a network vendor for the necessary repairs.

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 is home insurance?

For homeowners, home insurance can provide some financial protection to your property when things don’t go as planned. If you have home insurance and your property is damaged (or even the permanent fixtures inside), you could make a claim to your insurer to cover the costs of getting it fixed, replaced or rebuilt.

The idea behind property insurance is that you pay insurance providers to take on the risk of loss or damage to your property that you would otherwise be carrying. 

Do I need home insurance?

While homeowners' insurance is not legally required, it’s an option for those who want financial protection for their property. Some mortgage lenders may even require borrowers to take out home insurance.

How much is home insurance?

How much your home insurance could cost and the amount of premiums you pay will depend on many factors, including the amount you need to cover, the excess you're willing to pay, and what type of cover you want to take. 

It's important not to base your insurance policy decision solely on the premiums being charged, reviewing what the policy covers, its features, claim exclusions, and caps when deciding which home insurance policy is the right one for you.