A home insurance policy protects you, for example, if your house is damaged by a storm or destroyed by a cyclone. Contents insurance replaces your contents, for example, in case of theft. You can get both covers combined or separately.
Step 1: Beware of underinsurance
Estimates vary, but some say up to 80% of Australian homes are underinsured. This could mean you’re out of pocket by tens of thousands of dollars or more should your house burn down and you need to rebuild.
Some home insurance policies now fully cover you for rebuilding your house if it’s destroyed, even if you were technically underinsured. These are generally referred to total replacement policies as opposed to sum insured polices.
Some sum insured policies offer an additional amount of coverage above the sum insured to cover rebuilding costs (15% for instance), but this is not the same as total replacement and the additional insurance can fall short of fully funding rebuilding. Genuine total replacement is a great advance in consumer protection that CHOICE wants to see applied to all policies.
For contents insurance: Go through every room of your home and estimate how much it would cost to replace each item. Include everything: commonly overlooked contents include crockery and cutlery, bed linen, books, CDs, clothing and footwear.
Check limits on valuable items such as jewellery, watches and antiques. To get proper cover if the value of an item exceeds these limits, you need to specify it on your policy. This may cost extra but isn’t necessarily expensive. For more information see our report on insuring jewellery.
Step 2: Defined events or accidental damage?
Defined events policies: cover you against storm damage, fire, theft and a range of other specific events.
Accidental damage policies: cover those events plus any other mishaps. For example, if you accidentally spill a glass of red wine on your expensive new sofa or work in the roof space and damage a ceiling, an accidental damage policy will usually cover it; a defined events policy won’t.
Step 3: Check what’s covered
Home cover: The most common claims for home insurance are for severe weather such as storm damage, accidental glass breakage, damage caused by a burst pipe and motor burnout. On average, the highest claim amounts are for fire and legal liability. Most home policies do not cover for flood originating in a river – or riverine flood. Policyholders should be particularly attentive to the wording around water-related claims and ask insurers for clarification in writing about which types of events are covered.
Contents cover: The most common claims are for severe weather, theft or a motor burnout. The highest claim amounts are for legal liability.
Step 4: How to save
Shop around: We’ve found that average price differences between similar policies can be several hundred dollars per year.
- A higher excess will save you money.
Discounts can be available if you combine home and contents cover, buy your policy online, install security (an alarm), and for seniors.
Want to know more?
For more information, see the full CHOICE report.
To compare home insurance providers, visit our home and contents insurance review article for more details.
Looking for additional insurance? Visit our car insurance comparison article for a comparison of top car insurance providers.