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: 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
This insurance is more common and will cover you up to a set
amount ('the sum insured'), selected by you, to repair or rebuild
Pros - If you suffer a total loss, your claim
can typically be settled once the insurer has confirmed your
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
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 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
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
Use at least three calculators and compare the
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
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
||This cost is included in the sum insured; when you are
calculating the sum insured, you need to make an allowance for this
|'...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
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
Review your home insurance
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
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
- the value of your home has increased after you've
You can also be underinsured if you don't have enough contents
insurance to replace your things, especially your jewellery and
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 sure you have the right cover for your greatest asset when
you need it most.
Last updated: 19 Dec 2018