Choosing home insurance

Home insurance protects one of your most important assets.

What is home insurance

Home insurance covers the cost of repairing or replacing your house when something goes wrong. It usually also covers other structures on your property, like a garage or inground pool.

It doesn’t cover your household items and personal belongings though – they’re covered by contents insurance. You can often buy home and contents insurance as a bundle, if you want to.

When buying home insurance, price is important, but not everything. Focus on what you need, and what is (and isn’t) covered by different policies.

Home insurance covers the building itself and the fixtures, for example, plumbing and built-in cabinetry. It can also cover legal costs if someone is injured on your property.

You might not need home insurance if:

You own an apartment or unit under a strata title. Check with the body corporate to see if you need home insurance. The body corporate may be responsible for insuring the building. You’ll still be responsible insuring your household items and personal belongings though.

You’re renting. In this case you don’t need home insurance, it’s the landlord’s responsibility. But you will still need contents insurance.

If you haven’t reviewed your insurance for 12 months or more, it’s easy to become underinsured.

Home insurance product features to check

When you’re choosing home insurance, there are some important insurance policy-related things to check.

What parts of the “home” or “building” are covered

• Check how the insurer defines ‘home’ or ‘building’ so that you’re not caught out. For example, an inground pool might be covered, but an above ground pool might not. A granny flat might usually be covered but may not be if you’re renting it out.

What events are covered

• The insurer will give you a summary of what insured events are covered by the insurance. This will be things like flood, storm, theft, fire, lightning, earthquake, and malicious damage. There are many other events that may be covered.

• To find out if your home is in a natural disaster-prone area, contact your local council. Ask them about flood mapping, historical flood records, cyclone risk and the Bushfire Attack Level (BAL) of your home. That will help you work out what insured events to check for when you compare insurance.

What extra things are covered

• As well as covering the cost of repairing or replacing your house, there may be extra things covered as part of the insurance policy. Examples include removal of debris, temporary accommodation for you and your pets, emergency storage of contents, and damage to plants.

What other optional things might be covered for extra cost

• Insurers might also offer to cover of things, for extra cost. The things covered will vary from insurer to insurer, but might include things like accidental damage and excess-free glass replacement.

What things are excluded (not insured)

• Just as it’s important to know what is covered, it’s very important to know what isn’t covered (exclusions). To find out what isn’t included, you may need to read the product disclosure statement.

• Examples of exclusions might be damage caused by the sea, smoke, landslides or power failures. Even if flood is included, damage to some parts of your house may not be covered.

How much to insure your house for

Cover the cost of rebuilding your house

Work out an accurate sum-insured amount to avoid being underinsured. Most insurers have calculators on their websites to help you do this.

Use a home insurance calculator to work out your rebuilding costs. Find a calculator that asks lots of details about your home. This may include if it’s built on a slope, the quality of fittings and age of the home.

Try the contents calculator and building calculator on the Insurance Council of Australia website, to get an idea of the amount of insurance you might need.

Adjust your excess

Most insurers allow you to adjust your excess. This is the amount of an insurance claim that you have to pay.

For example, if the value of your claim was $10,000 and your excess was $500, you would have to pay $500 and the insurer would pay the balance.

Generally, a higher excess means the cost of the insurance (the premium) will be less. But weigh up the difference between having a low excess with a higher premium, versus the opposite. You may be able to save on your premium by increasing your excess – but you will need to pay more towards a claim that you make.

Compare home insurance

Insurers have to provide a Key Fact Sheet for their policies, and the government prescribes the information and layout of the documents, so that you can compare like for like.

To read the detail of what’s covered, you can download the product disclosure statement (PDS).

Comparison websites can be useful, but they are businesses and may make money through promoted links. They may not cover all your options. See what to keep in mind when using comparison websites.

Compare these features:

If you live in North Queensland, visit the Australian Government’s North Queensland home insurance website. This site helps you compare home insurance policies based on where you live.

Renewing your home insurance

When it’s time to renew your policy, check your level of cover. Take into account any changes you’ve made to your property. For example, landscaping, renovations, or a new pool may increase the cost of rebuilding.

Get quotes from a few other insurers to check you’re getting the best deal. You may end up paying more by staying with your current insurer.

Home insurance protects one of your most important assets. It’s worth taking a small amount of time to check that the cover you have is right for you.

Source: MoneySmart
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/home-insurance/choosing-home-insurance
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