A Guide to Home Insurance
Our homes are our havens. Whether we own property or rent, our homes are often the most valuable asset we own, so naturally, we want to know how to protect them. Home insurance is a great way to safeguard ourselves against the unknown.
But when the cost of living is so high, how do we know what to look for to help us minimise costs while still maximising protection? How much cover do we really need? And what does it mean to increase your excess?
In this post, we’ll guide you through the basics of home insurance and explain how you can get the most value out of your home insurance — starting with the basics.
What is Home Insurance?
Home insurance covers the cost of repairing or replacing your house when something – a natural disaster, break-in or accident – occurs. According to the Australian Bureau of Statistics (ABS), the cost of home insurance has surged by 16.2% since 2023 and is now outpacing overall inflation.
What Are the Different Types of Home Insurance?
- Building Insurance – covers the costs of repairing the physical structure of your home if it’s damaged. We’ve covered this topic here.
- Contents Insurance – covers the personal possessions within your home.
- Home and Contents Insurance – a combination of the above two under a single premium, protecting both your home’s structure and your personal items within it.
- Landlord Insurance – if you own property, this covers the property itself and items provided for tenant use like appliances.
- Contents Insurance for Renters – if you’re renting, this covers your belongings within your rental home.
How to Get the Most Value Out of Your Home Insurance
With the costs of home insurance only expected to continue rising, we’ve rounded up the key factors to look out for to help you keep costs down in that department, including:
- Understanding the cover you need
- Calculating the actual costs of rebuilding your house
- Familiarising yourself with the exclusions
- Comparing home insurance
- Renewing and updating your policy periodically
- Looking for discounts
- Accurately valuing your contents
1. Understanding the Cover You Need
First things first. When it comes to the types of cover you need, there are 2 main ones to choose from:
- Sum-insured cover: this is an estimate of how much it would cost to rebuild your home if it was destroyed.
- Total replacement cover: is the exact cost of repairing or rebuilding your home to the same standard.
Total replacement cover is more comprehensive, and you’re less likely to be underinsured. However, it is generally more expensive because of this.
2. Calculating the Actual Costs of Rebuilding Your House
If you opt for sum-insured cover, it’s in your best interests to work out an accurate sum-insured amount. Most insurers will have a calculator on their website to help you calculate this yourself.
When you’re inputting your details into these different calculators, make sure you use one that includes elemental estimating, where they ask you questions like:
- Is your house built on a slope?
- When was your house built?
- What’s the quality of your internal fixtures and fittings?
This will provide a more accurate gauge than cost per square metre, and therefore, help you get insurance that suits your specific requirements. Make sure you also check if other expenses are covered. These are deemed supplementary costs and can include additional expenses such as the cost of removing debris in the event of a natural disaster, or accommodation expenses during re-building.
3. Familiarise Yourself With the Exclusions
Home insurance covers loss and damage caused by exclusions caused by defined or insured events, including everything from fire, floods, storms, theft and vandalism.
When it comes to choosing your home insurance policy, you’ll want to check what’s not included to avoid being under-insured.
For example, some policies may cover damage from a storm but not damage caused by smoke, the sea, landslides or power failures.
Pay attention to what’s most relevant to you and your location.
4. Compare Home Insurance Providers
Different insurers have different policies and rates, so it’s to your advantage to shop around for the best level and type of insurance for you. An efficient way to do this is to check the Key Facts Sheets for each insurer or read their Product Disclosure Statements (PDS) to compare the following features:
- Premium: this is the periodic cost you make each policy period for your home insurance coverage. It’s generally annual but can also be monthly.
- Excess: this is your out-of-pocket cost of making a claim. You can reduce your premium by paying a higher excess in most cases.
- Exclusions: refers to items or events not covered by the policy. Always check for caps, limits or conditions on certain events like flooding.
- Legal liability cover: covers injury to other people or their property that happens at your home.
- Extended cover: these are extras to your sum-insured cover that can be included so that you’re not underinsured.
- Cover limits: some insurance policies will have a maximum limit for how much you can claim for certain items.
5. Renew & Update Your Policy Periodically
To get the most value out of your home insurance, it’s important to renew and update your policy periodically, making note of any changes you’ve made to your home that might impact this.
For example, a renovation or landscaping would increase your cost of rebuilding your home.
If you’ve been with the same insurer for over 24 months, you should feel empowered to ask for a discount or shop around elsewhere, as you’ll often get discounts for being a new customer.
6. Look for Discounts
Additionally, many insurers will offer discounts when you do things like install security systems, alarms or have a good claim history. If you’ve also got other insurance, bundling it together can also help bring your costs down.
7. Accurately Value Your Contents
To help you get the most accurate valuation for your insurance, go room by room and list everything, including receipts for valuable items.
