Home and contents insurance buying guide
Protect your assets against major disasters and minor mishaps.
Can you afford to lose everything?
Are you financially prepared for a major disaster like a fire, flood or storm, or even a minor mishap like a flooded laundry room or a broken window? Prepare for the worst by choosing the best home and contents insurance to protect your hard-earned assets.
Strictly speaking, home insurance and contents insurance are two different products. You can buy insurance for just your building, or for just your belongings, or you can combine them. If you get a combined policy, you assign both your house and your contents a separate sum insured amount – the total amount the insurer will pay to repair or replace your home or belongings.
- What type of policy do I need?
- What are the cover levels?
- How do I know how much the policy will pay?
- How to avoid under-insuring
- How to get the best premium
- Keeping up-to-date-records
- Cover for flood and actions of the sea
- Contents in the open air
- Optional and extra benefits
Video: How to find the best home and contents insurance
Building, contents, or both?
- Contents cover is for everyone: homeowners or renters. Some insurers will even cover people living in share houses.
- Building cover is essential if you own your house (or your bank does). If you're a renter you don't need to worry about this; insurance for the building is your landlord's responsibility. If you're in a strata property then your building should be insured through the strata plan.
What are the cover levels?
- Defined events: also called insured events, all policies will offer you cover if your property is damaged or lost as a due to one of a list of unfortunate events. Most policies will cover you for fire; explosions; flood; earthquake; tsunami; storms; lightning strike; theft; vandalism; and water or liquid damage from burst pipes, tanks, and similar.
- Accidental damage: on top of the defined events, some policies will cover you if your house or contents are damaged in the course of everyday life. What's more likely where you live: a cyclone smashing all the glass in your house, or the kids hitting a cricket ball through the lounge room window and into your TV?
When you take out a policy you list a sum insured figure: the dollar value to completely repair, rebuild and replace everything. If you're taking a home and contents policy, you have one figure for the house and one for your belongings. Many policies will also offer a safety net in case you under-insure.
- A sum insured policy will pay claims up to the amount specified on the insurance certificate.
- A safety net policy will pay a specified percentage – as much as 30% – above the sum insured amount.
- A total replacement policy will pay whatever it costs to repair, replace or rebuild (taking into account policy exclusions).
Most policies are sum insured, but safety nets are becoming common features. Twelve out of the 20 insurers we reviewed in 2016 offered at least one safety net or total replacement policy.
If the worst happens and you have to rebuild from scratch, there can be all sorts of costs on top of simply rebuilding: demolition fees, architect's fees, council charges, the cost of temporary accommodation. Many insurers will cover these costs on top of your building sum insured (up to a limit, usually around 10%). If you have building cover, check to see whether these are paid from the sum insured amount or are covered separately.
How to avoid under-insuring
To work out your 'sum insured' amount (how much it would cost to replace your home and contents) there are a number of calculators online to help you. Start by using your own insurer's calculator.
Go through every room of your home and estimate how much it would cost to replace each item. Include everything, such as commonly overlooked items like crockery and cutlery, bed linen, books, CDs and DVDs, clothing and footwear.
Contents policies usually set a limit for valuable items, such as up to $1000 per item and up to $5000 in total for jewellery. If you have items that exceed the limits, you need to list them separately with your insurer. If you choose not to do this, you won't be able to claim any higher than the standard sub-limit regardless of how much your valuables are worth.
Consider expenses like removal of debris, building or architect's fees, costs to comply with council regulations, increased cost of material in a widespread disaster, temporary accommodation costs and mortgage discharge fees to name a few.
Check if these expenses are included in your sum insured amount or if they are covered on top of your sum insured amount.
During times of disaster, building services and temporary accommodation may be in short supply and prices will go up. If you live in an area that is prone to natural disaster such as flood or fire, consider purchasing extended or total replacement protection.
Before you purchase or build a home, get a few quotes from insurers. Premiums may be unaffordable for flood-prone areas. Check with your local council to see if flood maps are available.
How to get the best premium
- Get quotes from three insurers – some will match or beat competitors' premiums.
- Vary your excess, as small increases in the excess can lead to big savings on premiums.
- Many insurers offer cheaper premiums for new customers than they do for renewals. Simply checking your renewal price on your current insurer's online quote calculator could save you plenty.
- Most insurers offer a discount for combining home, contents and more. If you can get the cover you need by combining insurance, it's a useful way to save.
Keep up-to-date records
- Take clear, close-up photos of all your belongings and be sure to store any relevant receipts or proof of purchase.
- Keep records of email and phone communications with your insurer confirming definitions and coverage, in case of any future disputes.
- Do your own insurance evaluation – are there dangers around the home waiting to cause damage or an accident? Leaky roofs are a common cause for claims-denial, so this is a good place to start.
- At each renewal, take photos showing how spick and span your building and contents are in the event you need to make a claim.
Water, water, everywhere: floods and the sea
Many insurance policies now charge for mandatory flood cover, regardless of where you live. They now include a standard industry-wide definition of flood. Only a few insurers allow their customers to opt out of flood cover (thereby lowering their premiums), and it's at their discretion – if you live on a flood plain might not be allowed to drop it.
Actions of the sea
Most insurers will exclude a range of events collectively called "actions of the sea". These include high tides, storm surges and tidal waves – just about anything the ocean can do to get up on land and ruin your day.
This is only relevant if you're one of the lucky few who get to live right next to the ocean. But if you are, it's essential to know precisely in what circumstances your insurer will cover you. There is a lot of variation between products, so it's worth looking at the detail.
- Damage by tidal waves and high tides is typically not covered.
- In some cases you will be covered storm surge – where the sea level because of a storm – but sometimes there are restrictions. A number of insurers will only offer cover for storm surge if you are also affected by a flood.
- Does "storm surge" have a specific definition? For example, Westpac includes this under flood cover, but defines it as an increase in the sea level "caused by a cyclone", but not any other sort of intense storm. Don't let yourself get put in the position where the insurer can wriggle out of covering you because of their definitions.
- With the exception of RAC and Coles, tsunamis aren't defined as an action of the sea – they either have their own place on the insured events list or are included under earthquake.
Contents in the open air
A big point of difference between contents policies is cover for items left in the open air. If you leave your stuff outside and it gets stolen or damaged in an insured event, most policies will offer you some level of cover. There are usually restrictions – insurers don't want you to leave your electronics, cash and jewellery out in the front yard, so they exclude these. And most policies will only insure you up to a certain percentage of your total sum insured.
Each insurer has its own definition, so it pays to be sure what this is before signing up. A common definition is also the most intuitive: open air is anywhere on your property that is exposed to the elements. Some insurers even include non-lockable structures, like a garden shed.
Optional and additional benefitsSome policies don't include full coverage but allow you to buy extra cover for an additional amount. The most common optional covers include:
- burnout of electric motors (also called motor fusion)
- domestic workers compensation (in states where it is legal to sell with home insurance: ACT, Tasmania, WA)
- vet bills if your pet is accidentally injured
- public liability insurance, if you're responsible for damage to someone else's property, or you cause injury or death to another person in an accident – up to $30 million. Contents policies cover you away from home, building policies only cover you on your property.
- variable excess: increasing this will lower your premium, but remember you'll need to pay it in the event of a claim. A higher excess makes small claims less valuable.
Check the fine print
If you don't understand a certain word or term in your policy's product disclosure statement (PDS), ask the insurer for clarification, or check our jargon-busting glossary below.
Accidental breakage: This typically applies to glass and ceramics only. For full accident cover, you'll need an accidental damage policy. There may be restricted items such as televisions and electronics, computer screens, glasshouses, conservatories, china, tiles and shower bases, vases or ornaments, and breaks due to the application of heat. Read this section of your policy carefully if breakage of these items is important and you don't have cover for accidental damage.
Accidental damage: Put your foot through the roof? Kids repainted the lounge room in permanent marker? You'll need accidental damage cover if you're expecting these types of mishaps, as 'defined events' won't cover them. Accidental damage policies also cover all the events listed under 'defined events' policies (often with the same conditions).
Don't confuse accidental damage with accidental breakage. Most insurers clearly separate the two terms, but some indicate they have accidental damage cover and then go on to say it only covers restricted items like some types of glass.
Away from home: If you're travelling for more than 30-60 days, check to see how this affects your home and contents insurance. In some cases, cover may be restricted or void completely if you leave your home unattended for an extended period.
Combined discount: Most insurers offer a discount for combining home, contents and more. However, the danger is you will end up with one or more aspects of cover that aren't really right for you. Shop for the protection you need first.
Contents in transit: This cover typically applies when moving house (you'll need to inform your insurer of this too). Cover varies and conditions and sub-limits typically apply. For example, many insurers will only cover contents damaged in a collision or fire (and not accidental breakage, chips or scratches).
Contents in open air: This cover is to protect contents typically left outside, like outdoor furniture, but depending on your policy can also include "inside" items. Each insurer has its own definition, so it pays to be sure what this is before signing up.
Driveways: Cover is typically limited to bitumen and hard-surface driveways (gravel and loose-surface driveways are typically excluded).
Damage by animals: This is a standard feature in most defined events policies, but there are severe restrictions. If your pet causes the damage, the cover does not apply. Damage caused by biting, pecking, clawing or chewing is also excluded from cover. Generally, this leaves impact damage and animals accidentally trapped inside a home.
Defined events: Most policies cover defined events only. All policies we review here cover fire, vandalism, explosion, impact damage, lightning and earthquake. Other events commonly (but not always) covered include landslide, storm damage, flood, damage by animals, tsunami and water or liquid damage from pipes, tanks, pools, baths and basins.
Earthquakes: All policies we surveyed cover earthquakes, but an additional excess may apply.
Embargo period: Similar to a waiting period in health insurance, insurers often won't cover you for natural disasters like flood or bushfire for the first couple of days. They don't want to cover people who only buy insurance after the river has burst its banks.
Flood: All policies offer cover for flood, which has an industry-wide standard definition. A few allow customers to opt out if they don't live in a flood zone, but not many.
Fusion: This covers electrical motors that burn out or fuse and stop working. Cover varies between insurers, and spoiled food may also be covered in some cases. Restrictions apply, most often to submersible or underground motors (think pools and bores), business items and electronics (like televisions). Motor age limits also apply (usually 10-15 years maximum). Read your policy for full details.
Gates, fences and retaining walls: Often there are special conditions for these items to qualify for cover (if they are covered at all). This may include the type of fence construction and age of the structure. If you have an expensive fence or retaining wall, be sure to look at this section carefully.
Landlord's insurance: Generally, the same cover elements apply to this as to home insurance, however there may be additional protections or requirements.
Landslide: Some insurers do not cover this at all. Those that do cover landslide will only do so when it is caused by a specific event, such as an earthquake or storm. There may be a time limit on what damage is covered (e.g. only damage that occurs within 72 hours of event).
Legal liability: All insurers cover this, but restrictions and exclusions may apply. For example, cover is void when illegal activities are involved, or when intentional harm or damage occurs. Liability cover in a contents policy covers you away from your home, while the liability cover in a building policy gives you protection on your property.
New-for-old replacement: Cover varies between insurers and normally there are restrictions too. For example, insurers may opt to repair items first if it is economical to do so. There may also be item limits, especially for things like art and memorabilia.
Pet cover: Some insurers will pay a benefit for vet bills or accidental death either as standard or as an option. The benefit is typically minimal with lots of restrictions, especially compared to other products on the market. Although it doesn't hurt having this benefit, we'd suggest reading our pet insurance buying guide if this cover is important to you.
Safety net: Pays a specified percentage – as much as 30% – above the sum insured amount.
Shared household: Limits or restrictions may apply if you live in a sharehouse or lease a part of your home to a tenant. Check the details with your insurer to avoid problems in the event of a claim.
Storm surge: This is where the sea level rises as a result of a cyclone or other intense storm. Sometimes this is covered under the flood definition, and sometimes you are only covered if there is also a flood at your property. If you live next to the sea make sure you know what the limitations are.
Sum insured: This type of policy pays claims up to the sum insured amount specified on the insurance certificate. Under-insurance is a common problem, so be sure you have calculated the value of your home and contents correctly.
Theft: Most policies insure against theft, but many stipulate that theft is not covered when the thief enters with the owner's consent. This rules out any theft that occurs, for example, during a real estate inspection, or at a party, or if you hire a contractor or labourer to work on your property.
Tools of the trade: Sub-limits apply to tools, and different limits apply to surgical tools where applicable. As with other valuables, expensive items should be listed separately on your policy (or insured elsewhere) if this is a concern.
Total replacement cover: This type of policy pays whatever it costs to repair or rebuild the building, taking into account policy exclusions.
Tsunamis: Most policies we surveyed include tsunami cover, either as its own insured event or as part of their earthquake cover.
Valuables: Sub-limits apply for valuables like cash and jewellery. If you have high-value individual items, strongly consider whether you need to list them separately on your policy or at least factor this in to any emergency fund you've put aside. In some cases, listed items may be covered away from home (such as on a holiday).
Visitor's contents: Cover varies, and cash and other valuables may be excluded from cover. Sub-limits apply.