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How to find the best home and contents insurance policy

Protect your assets against major disasters and minor mishaps with this comprehensive guide.

storm looming over house home insurance

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.

What type of policy do I need?

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. If you're a tenant or own a strata title home, read our guide to buying contents insurance.

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. You may also be able to select a different excess for building and contents claims.

What does home insurance cover me for?

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:

  • fire and explosion
  • flood (sometimes optional)
  • storm and rainwater
  • lightning
  • accidental breakage of glass, ceramics, etc.
  • earthquake and tsunami
  • theft and attempted theft
  • vandalism and malicious damage
  • impact damage (e.g. falling trees)
  • sudden escape of liquid (e.g. burst pipes)

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. This cover is usually included in top tier products, or as an optional extra.

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? Remember that if you select a high excess, it might be cheaper to repair the damage out of your own pocket than making a claim.

family playing cricket in backyard

Accidental damage covers you in the event your game of backyard cricket leads to a broken window.

How much will my policy will pay out?

It all depends on your type of policy:

Sum insured policies will pay claims up to the amount specified on the insurance certificate. That is, you nominate how much your home and contents would cost to replace, and in all but a few circumstances the insurer will pay up to that amount.

Safety net policies will pay a specified percentage – as much as 30% – above the sum insured amount.

Total replacement policies will pay whatever it costs to repair, replace or rebuild (taking into account policy exclusions). Total replacement only applies to building cover.

Most policies are sum insured, but safety nets are becoming more common and are useful in case you're under-insured. Sixteen out of the 29 insurers we reviewed in 2018 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. Some insurers cover certain costs (e.g. demolition and debris removal) on top of your sum insured, while others don't – their calculators will take these costs into account, which is why the results might differ between calculators.

If you're taking out a combined home and contents policy, you'll need to list two sum insured figures: one for your home and one for your contents.

How to get the best premium

  • Shop around. Get quotes from three insurers – some will match or beat competitors' premiums.
  • Vary your excess - small increases in the excess can lead to big savings on premiums.
  • New customers often get cheaper premiums than renewing customers. Simply checking your renewal price against your current insurer's online quote calculator could save you plenty.
  • Consider multiple policies with one insurer to get a bigger discount. If you can get the cover you need by combining insurance, it's a useful way to save. However, make sure all their policies suit your needs – you don't want to get discounted home and contents cover just to end up with a dud car insurance policy.

Flood cover and actions of the sea

Many insurance policies now include flood cover as default, regardless of where you live. Some insurers still include it as an optional extra, while a few insurers let you opt out, although this is usually at their discretion. If you live on top of a hill you might gripe about having to pay for cover you don't need, but if your risk is low then flood cover will make up a negligible percentage of your premium.

Flood is the only insured event that has a standard, industry-wide definition: "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".

houses in flood water with sign saying high water

Flood cover is included in most policies, even if you live in a low-risk zone.

Will my policy cover 'actions of the sea'?

It's unlikely. Most insurers exclude 'actions of the sea', which are a range of events that include:

  • high tides
  • storm surges
  • tidal waves.

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.

Storm surge

A storm surge is when there's an increase in the sea level because of a storm. In some cases, you'll be covered for a storm surge, but there may be restrictions. For example, some insurers will only offer cover for storm surge if your property is also damaged by a flood, or if the surge is caused by a cyclone.

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.

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 extra cover and features

Some policies don't include full coverage, but give you the option to buy extra cover for an additional amount. Top tier policies tend to include these features as standard. The most common additional covers include:

  • Ancillary rebuilding costs, such as architect fees or the cost to comply with building regulations.
  • Debris removal and demolition. Check whether this is paid out on top of your sum insured, or if you need to factor in these costs when deciding how much to insure for.
  • Environmental upgrades, including water tanks or solar panels if these weren't already installed.
  • Electric motor burnout, in case your washing machine or fridge carks it. Some policies also offer a few hundred dollars to replace spoiled food and medications if your fridge or freezer dies.
  • Cover while moving house, with a few weeks overlapping cover at your new and old addresses, as well as some cover while your things are in transit.
  • Visitors' contents, usually up to a few hundred dollars.
  • Vet bills, usually only if your pet is injured in a car accident or insured event, but some policies cover illness as well. The amount you can claim is much less than what a separate pet insurance policy covers.
  • Temporary accommodation if you can't live in your home after an insured event. For renters, this usually covers the additional rent you have to pay to move into a similar place.
vet vaccinating a kitten

Some policies give you the option to include cover for extras, such as vet bills if your pet is accidentally injured.

How to keep good records for 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.

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