Home insurance

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' policy.

Choosing a home insurance policy

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 insured'.

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 costs.

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 insurance policy.

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.

Smart tip

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.

Video: Scott Pape on choosing the right home insurance policy

Scott Pape on choosing the right home insurance policy for you video

In this video, Scott shares his tips for picking the right home insurance policy.

Is your home in a risky area?

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 area.

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 insurance policy

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.

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Last updated: 26 Oct 2017