What does home and contents insurance cover?

No one wants to be in a situation where they’re forced to make a claim on their insurance. But when life takes an unexpected turn, they may start wondering how their insurance can help.

While it’s possible to bundle your home and contents insurance together, many don’t realise that the two are separate policies. To know the type and level of financial protection you have, it’s important to have at least a general understanding of what the two types of insurance cover.

What does home insurance cover?

Home insurance is generally the most basic form of insurance, so most home owners have this. Under the law, you’re not required to take out insurance, but most mortgage lenders will require home owners to get home insurance before the property is settled.

Typically, home insurance covers financial loss in the event of damage to the main residential property, 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.

Home insurance may cover your home against certain events which can cause damage, including fire, floods, theft or vandalism. In many cases, these are considered optional cover. Being covered for defined events could increase the cost of home insurance.

You may also opt to pay extra for accidental damage cover. This covers your property for damage caused by one-off unintentional incidents. This generally excludes wear and tear over time. Consider checking your product disclosure statement (PDS) for specific exclusions and conditions.

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.

What does contents insurance cover?

Generally speaking, contents insurance covers your personal possessions inside your home. These could include items such as furniture, whitegoods, appliances, electronics and jewellery. 

This type of insurance doesn’t cover anything that’s permanently fixed to the site or building; those usually come under home insurance. Contents insurance also generally doesn’t cover items that belong to any people visiting your home which are accidentally lost or damaged on your property

The extent of your cover depends on the level of insurance you have. The basic level of contents insurance, which is often also the most affordable option, only covers you in limited events listed in your PDS. Examples of these events may include burglary, storms or fire.

As with home insurance, you could go for optional accidental damage cover to provide a financial safety net for your home’s contents if an accident happens. Remember that wear and tear to any items over time aren’t included in accidental damage cover.

If your belongings are lost or damaged inside the home, you may be able to make a claim to your insurer to cover the costs of getting it fixed or replaced. If approved, the insurance company may either:

  • directly repair or replace the covered contents or
  • pay you the repair or replacement costs.

Both owner-occupiers and renters can take out contents insurance to provide financial protection against their possessions, regardless of what kind of property they live in. For renters, it’s important to note that your home’s contents aren’t covered by any insurance your landlord has.

For personal belongings you take outside the home often, you could also take out extra cover to insure it against damage, theft or loss. This cover is optional and is known as personal effects insurance. Some items that may be covered by personal effects insurance include your handbag, jewellery, camera or smart phone.

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.

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Learn more about home insurance

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.

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. 

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.

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. 

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.

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.  

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.

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 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.

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.