Cover for the home you own
Protecting your home against damage or loss is really
important. Here we explain how to choose a home insurance
policy, and how to avoid underinsuring your property so you're not
left out of pocket if the worst should happen.
What is home insurance?
Home insurance (also called building insurance) covers the cost
of rebuilding or repairing your home and helps protect you against
things that are out of your control, such as damage from natural
disasters like storms, floods and bushfires.
Homeowners usually bundle their home insurance policy with contents
insurance into a combined 'home and contents insurance'
Choosing a home insurance
There are two types of home building insurance. First you need
to decide which one suits you best:
- Total replacement cover - will cover the
cost to rebuild your home to the standard it was prior to an event,
which reduces the chance of any shortfalls between what it costs to
repair or rebuild your home and the amount you are insured for.
Total replacement policies reduce the risk of underinsurance, but
only a few insurers offer these policies.
- Sum-insured cover - is more common and
will cover you up to a set amount, selected by you, to repair or
rebuild your home. This set amount is referred to as 'the sum
All insurance policies have exclusions, caps, limits and other
conditions which can vary between insurers, so it is important to
ask questions and read the product disclosure statement (PDS) when
comparing different policies.
Also check you will have enough insurance money paid out to you
to rebuild your home at today's prices. To know if the payout
amount is enough, you'll need to work out how much it will cost to
rebuild your home. Find out more about estimating rebuilding
Do total replacement policies lower your risk?
'Total replacement' policies have a lower risk of
underinsurance, as the insurer agrees to either rebuild your
building to the standard it was in before it was damaged or
destroyed, or pay you the assessed cost to rebuild. It might take
some time to receive the funds under a 'total replacement' policy
if you suffer a total loss, as the insurer will need to conduct a
full assessment to work out the cost of rebuilding your home. This
could also be delayed if access to your property or the local area
is restricted due to a natural disaster.
Extended cover for sum-insured policies
If you have a sum insured policy the amount you will be paid has
already been agreed, so if you suffer a total loss your claim can
typically be settled once the insurer has confirmed your loss -
however there is a higher risk of underinsurance. You will be
underinsured if there is a gap between the estimated rebuilding
costs and the actual rebuilding costs.
Some sum-insured policies offer an 'extended cover' policy that
provides up to 30% on top of the sum insured in the event of a
total loss - this is a good way to reduce the risk of
underinsurance. Make sure you read and understand the conditions
that apply to this type of policy.
Rebuilding your home involves more than replacing the bricks and
mortar. There are many extra costs involved that you may never
think about until you need to claim on your policy. See our webpage
on home insurance
supplementary costs for tips on what to look for in your home
How to compare home insurance policies
Building insurance policies differ between insurers and even
between home insurance 'brands' offered by the same insurer.
Compare the features and prices of at least three policies
before you choose one. This will ensure you shop around for the
right level of cover at the best price. It's as simple as phoning a
few insurance companies, or visiting a few websites.
Find out what you would be covered for with each policy and what
you are not covered for (exclusions) including any caps or limits.
Also, check if the policy offers any additional benefits.
Many insurers won't cover events which occur if your home is
unoccupied for more than 60 days. Check your policy.
You can get information about policies
from the product's key factsheet, which will be on the insurer's
website, or you can ask them to send you a copy. The factsheet
summarises key information about the policy including what you are
and aren't covered for.
If you want more detail than what's in the key factsheet, read
the product disclosure statement (PDS), which
you can also get from the insurer.
If you live in North Queensland, the North Queensland home insurance
website can help you compare policies.
Is your home in a risky
Some homes are located in areas of increased natural risks, such
as bushfire, flood or cyclone. If you live in an area of increased
risk it is important that your home insurance covers these events
and that you have enough insurance (sum insured) to rebuild or have
a total replacement policy.
Most policies cover fire but not all cover for flood and
cyclone. For bushfire risk, you may want to understand your home's
Bushfire Attack Level (BAL). If your home is destroyed, you may
need to rebuild it to comply with new building codes which can
increase the cost of rebuilding.
Our storms, floods and fires
webpage explains how to find out if you live in a disaster prone
Why you need to be honest with
your home insurer
You must be totally honest with your insurer:
- when you buy or renew a policy
- if you make a claim
- if your circumstances change.
Failing to meet the requirements of your insurance policy may
mean any claim you make gets denied.
You should also ensure your home is properly maintained. For
example, some insurers insist you have deadlocks on your doors and
windows. You could also install an alarm.
Making a claim on your home
If you want to make a claim on your building insurance policy,
contact your insurer immediately to tell them about any damage or
loss. Be honest with them and provide as much information as they
need to process your claim as quickly as possible. Keep copies of
all documents supporting your claim.
Check the details of your home insurance policy
to make you have the right cover for your greatest asset when you
need it most.
Last updated: 26 Oct 2017