How to find the best home and contents insurance policy
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.
Video: How to find the best home and contents insurance
- What type of policy do I need?
- What are the cover levels?
- How much will my policy will pay?
- How much cover do I need?
- How to get the best premium
- Flood cover
- Will my policy cover 'actions of the sea'?
- Cover for contents in the open air
- Optional extra cover
- Record-keeping requirements
Strictly speaking, home (aka building) insurance and contents insurance are two different products.
- Contents cover is for everyone: homeowners or renters. Some insurers will even cover people living in share houses.
- Home 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.
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 are the cover levels?
Defined (or insured) events
All policies will offer you cover if your property is damaged or lost due to one of a list of unfortunate events.
Most policies will cover you for:
- lightning strike
- water or liquid damage from burst pipes, tanks, and similar.
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?
It all depends on your type of policy:
- 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 more common and are useful in case you're under-insured. Twelve out of the 20 insurers we reviewed in 2016 offered at least one safety net or total replacement policy.
How much cover do I need?
To avoid under-insuring, you'll need to work out your 'sum insured' figure.
What's a sum insured figure?
It's the dollar value to completely repair, rebuild and replace everything. There are a number of online calculators that can help you work out your sum insured figure. Start by using your own insurer's calculator.
If you're taking out a combined home and contents policy, you'll need to list two sum insured figures:
- one for your home
- one for your contents.
- Go through every room of your home and estimate how much it would cost to replace each item – including 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 don't, you won't be able to claim any higher than the standard sub-limit, regardless of how much your valuables are worth.
- If the worst happens and you have to rebuild from scratch, there can be all sorts of costs on top of simply rebuilding. 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're covered on top of your sum insured amount. 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.
- 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's prone to natural disaster such as flood or fire, consider buying extended or total replacement protection.
- Before you buy 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.
Many insurance policies now charge for mandatory flood cover, regardless of where you live.
Only a few insurers let customers opt out of flood cover (thereby lowering their premiums), and it's at their discretion – so if you live on a flood plain, you might not be allowed to drop it.
What is a flood?
The standard industry-wide definition of flood is: "the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal, or dam".
It's unlikely. Most insurers exclude 'actions of the sea', which are a range of events that include:
- high tides
- storm surges
- tidal waves
… and just about anything the ocean can do to get up on land and ruin your day.
This is only relevant if you 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's a lot of variation between products, so it's worth looking at the detail.
Tidal waves and high tides
Damage is typically not covered.
A storm surge is when there's an increase in the sea level because of a storm.
In some cases, you will be covered for a storm surge, but there may be restrictions. For example, a number of insurers will only offer cover for storm surge if you are also affected by a flood.
Don't let yourself get put in the position where the insurer can wriggle out of covering you because of their definitions.
Always check if your insurer has a specific definition for a storm surge. 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
If you leave your stuff outside – that is, in the open air – 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 these are excluded. And most policies will only insure you up to a certain percentage of your total sum insured.
But before you sign up, check what your insurer's definition for open air is. While many define it as anywhere on your property that's exposed to the elements, some may also include non-lockable structures, like a garden shed.
Optional and additional benefits
Some policies don't include full coverage, but give you the option 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 this 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.
Record-keeping requirements for home and contents insurance
- Take clear, close-up photos of all your belongings and 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.
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
TVs 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'll 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 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 let customers 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're only covered if there's 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've 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.