Is home insurance worth it?

Home insurance in Australia is a valuable safety net for homeowners. For many homeowners, the property is their most important asset, and an unforeseen event could result in severe financial loss. If something unfortunate happens to your residence, home insurance can assist you in protecting your assets and money, providing you with greater peace of mind.

Home insurance (also known as building insurance) is an insurance product in Australia that covers the building structure, including any garage or shed on the property. It does not cover the belongings and contents inside the home.

Contents insurance covers the cost of repairing or replacing your personal belongings inside the property if they’re damaged in an insured event. This type of insurance is suitable for all types of residents, particularly renters, as they don’t need insurance on the home they’re renting.

A home and content insurance policy combines the two products to cover both the building structure and the contents inside. This comprehensive home insurance cover may include repair, rebuilding or replacement after an insured event, temporary accommodation and legal liability cover. You can also opt for optional extras like accidental damage, portable contents or motor burnout.

The cost of home and contents insurance in Australia can vary widely based on several factors, including:

• Sum insured: When deciding on the sum insured amount, consider your expected building costs and the value of your belongings. You can estimate the replacement value with a home and contents replacement cost calculator and then choose your insured amount.
• Location of the property: You’ll typically pay higher premiums if your insured address in Australia is in a location with more claimable events, such as cyclones or thefts.
• Level of cover: For example, selecting building and contents cover will cost more than a standalone contents insurance policy. You’ll also have to pay more for optional extras like accidental damage cover that you add to your standard policy.
• Insurance provider: Different insurers offer different rates and discounts. For example, some insurance companies discount your first year’s premium for a new policy, so it pays to compare.

If you want an idea of how much your home insurance may cost, you can get a home and contents insurance quote from our comparison service.

You can lower the cost of your home insurance through a combination of smart choices and adjustments.

• Shop around for better deals: Insurance premiums vary significantly between providers, so it pays to compare. Explore different policies and find the one that offers the best comprehensive coverage at a lower rate.
• Increase your excess: Opting for a higher excess (the amount you pay out-of-pocket when you make a claim) can reduce your premium. Just ensure you can cover the excess if you need to make a claim.
• Improve home security: Adding security features like alarm systems, deadbolts and security cameras can reduce your risk of theft, which, in turn, may lower your insurance premiums. Some insurers offer discounts for homes with improved security measures.
• Review and adjust your coverage: Ensure you aren’t paying for more cover than necessary. For example, if you’ve recently downsized, your home may not need as much insurance as before, although your premium may also change due to other factors at your new address. Regularly reviewing your policy ensures you’re not under or over-insured.

Over-insuring your home can mean you’re paying for more cover than necessary. Insurance policies won’t pay more than the cost of rebuilding your home or replacing your belongings, so overestimating your home value will only lead to unnecessarily high premiums without added benefits.

Underinsuring your property means you haven’t covered it for its total value, so your potential payout may not be enough to rebuild your home or replace your belongings in a disaster. This is particularly risky if rebuilding costs have risen since you took out the policy, leaving you with a significant financial shortfall. Under-insurance can also affect partial loss claims, where you might receive less than you expect due to the extent of any underinsurance.

Landlord insurance is a type of property insurance that protects Australian rental properties against loss or damage to the building and its permanent fixtures. The purpose of landlord insurance is to safeguard homeowners who lease their properties.
In addition to standard homeowners’ insurance, it can also cover certain risks related to renting a property. Landlord insurance may not only cover natural disasters like bushfires and floods but can also provide policyholders with cover for other situations involving tenants, such as accidental damage, malicious damage caused by tenants, theft by tenants or their guests, rent loss if the tenants breach their lease, and even legal fees if you need to remove a tenant.

Strata insurance is a type of building insurance that covers shared property in both residential structures (such as apartments and townhouses) and commercial buildings (such as workplaces). It’s intended to cover the entire property, including shared areas. However, it does not cover the contents and belongings in an individual unit.

You are unlikely to need building insurance if your property is covered by strata insurance. Instead, general advice is to consider getting a contents insurance cover to protect your furniture and other belongings in your home.