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: total replacement cover and sum-insured cover. 

Total replacement cover

This insurance will cover the cost to rebuild your home to the standard it was before an event.

Pros - Reduces the chance of any shortfalls between what it costs to repair or rebuild your home and the amount you are insured for (also known as 'underinsurance').

Cons - Only a few insurers offer total replacement policies. It might also take some time to receive the funds under this 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. 

Sum-insured cover

This insurance is more common and will cover you up to a set amount ('the sum insured'), selected by you, to repair or rebuild your home. 

Pros - If you suffer a total loss, your claim can typically be settled once the insurer has confirmed your loss. 

Cons - There is a higher risk of underinsurance, where the actual rebuilding costs exceed the estimated 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, but make sure you read and understand the conditions that apply to this type of policy.

Important: Look at policy exclusions

Before you choose an insurance policy, it's important to remember that all 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. 

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 facts sheet, which will be on the insurer's website, or you can ask them to send you a copy. The facts sheet summarises important information about the policy including what you are and aren't covered for.

If you want more detail than what's in the key facts sheet, read the 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. 

How much insurance do you need? 

When estimating how much home building insurance you need, it's important not only to consider the cost to rebuild your home, but also factor in other costs you may not have thought about, such as accommodation while you rebuild. 

Estimating rebuilding costs

Many insurers have online calculators on their websites to help you work out the 'sum insured' for your home, but not all calculators are the same. Calculators generally use two different methods to estimate rebuilding costs. 

  • Cost per square metre - provides a rough guide based on the size of the house and the materials used. Calculators using this method generally ask fewer than 10 questions and may not take into account all the features of your home. 
  • Elemental estimating - assesses in detail the different elements of the building to calculate rebuilding costs from the ground up. Calculators using this method will take up to 15 minutes to complete because you're getting a more personalised estimate of what it would cost to rebuild your home. 

The best web calculators are the ones that ask lots of questions about your home, such as whether it is built on a slope, the quality of internal fixtures and fittings, and when your house was built. 

Use at least three calculators and compare the results. 

Home insurance supplementary costs

Additional or 'supplementary' costs are extra expenses you have to pay if you need to rebuild your home. They are things you may not always immediately think of when working out what kind of home building insurance you need, including the costs of: 

  • alternative accommodation while your house is rebuilt
  • removing debris from the site
  • drawing up and lodging plans with your local council.

To see if you are covered for these additional costs, check your policy document in the section that describes when the insurer will pay claims for damages and how they cover each cost.

Insurers have three main ways to describe what they will pay. The following table applies this wording, using architects' fees as an example.

What the policy says
'We will pay architect fees...'

What this means
'...up to a maximum of 10% of the sum insured' This cost is not included in the sum insured and the amount the insurer pays out is limited.
'...from the sum insured and will not pay more than the sum insured' This cost is included in the sum insured; when you are calculating the sum insured, you need to make an allowance for this cost.
'...up to a maximum of 10% of the sum insured unless the sum insured is not used up or exhausted' The insurer will pay a maximum of 10% of the sum insured, but this amount can be increased if the sum insured is not used up when paying for other things.

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's important that your home insurance covers these events and that you have enough insurance (sum insured) to rebuild or have a total replacement policy. 

Our storms, floods and fires webpage explains how to find out if you live in a disaster prone area.

Review your home insurance policy

It's important to regularly check your policy to see how much your insurer will pay and under what circumstances, and when they may reject a claim. Make sure you assess your level of cover regularly, and take into account any changes you have made to your property (e.g. landscaping, renovations, a pool, etc.).

You must be totally honest with your insurer when you buy or renew a policy, make a claim, or if your circumstances change. Failing to meet the requirements of your insurance policy may mean any claim you make is denied.

Could you be underinsured?

Underinsurance is when you don't have enough insurance to cover all the costs of rebuilding your home. You are considered to be underinsured if your insurance covers less than 90% of the rebuilding costs.

You could be underinsured because:

  • it's hard to estimate what it costs to rebuild a home
  • your policy is old and you haven't updated the level of cover needed
  • the value of your home has increased after you've renovated.

You can also be underinsured if you don't have enough contents insurance to replace your things, especially your jewellery and collections. 

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 sure you have the right cover for your greatest asset when you need it most.

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Last updated: 19 Dec 2018