What is home insurance and what does it cover?

What is home insurance?

Home insurance is designed to cover you financially should something happen to your home and/or belongings:

• Building: Covers the building itself and the fixtures.
• Contents insurance: Covers your personal belongings.
• Home and contents insurance: Covers both the building itself and your personal belongings.

What type of home insurance do I need?

The best type of home insurance for you will depend on your personal circumstances. However, some types of home insurance are structured specifically for customers in certain living situations:

Owning a home and living in it

If you own your home, you may want to take out a combined home and contents insurance policy. If you have a home loan, it may even be a condition of your loan that you have building insurance.

Owning an investment home

For landlords, you may want to take out a separate kind of home insurance called landlord insurance. This typically covers loss or damage to your investment property and any furnishings you own, and in some cases may also cover tenant default.

Living in a rented home

If you are a renter, you would only need to consider contents insurance (sometimes also called renters insurance).

What type of policy cover do I need?

You may have the option of taking out a ‘sum-insured’ or a ‘total replacement’ home insurance policy.

Sum-insured cover

Sum-insured cover is where you provide an estimate of how much it would cost you to rebuild your home if it was totally destroyed. This figure is typically the maximum amount you can claim on your policy, even if construction costs have risen since taking out the policy. This could potentially leave you at risk of being underinsured when you need it.

Total replacement cover

Total replacement cover insures you for the total cost of repairing or rebuilding your home to the same standard. Even if construction costs have increased, the policy should still be able to cover a total rebuild if necessary, reducing your risk of underinsurance. According to Moneysmart, not many insurers in Australia offer total replacement cover and it is typically more expensive.

What does home insurance cover?

Home insurance covers your home and/or contents if it is damaged or destroyed due to an ‘insured event’. Cover will vary between insurers, but it generally covers events such as:

• Fire
• Theft
• Storm
• Earthquake
• Explosion
• Impact damage (such as from a car or a falling tree)
• Escape of water (such as from a burst pipe)
• Vandalism and riot

Insurers may also offer benefits such as legal liability cover (covers your liability to pay compensation if someone is injured or their property is damaged at your home) and temporary accommodation (if your property becomes unlivable because of an insured event).

Home insurance exclusions

Home insurance policies may also come with certain exclusions. For example, many policies do not cover you if you intentionally cause damage or loss. Policies also typically don’t cover damage caused by vermin or insects, or from wear and tear and gradual deterioration.

If you leave your home unoccupied for weeks at a time, the insurance for your home or contents could also be affected. It’s often worth reading the insurer’s product disclosure statement (PDS) carefully, so you are familiar with what is excluded from cover.

Home insurance optional extras

You may also be able to add optional extras to your home insurance policy. For example, some insurers offer as optional extras cover for:

• floods,
• accidental damage,
• motor burnout,
• mobile and portable valuables, which covers certain listed valuables even when they are out of the house,
• moving house,
• visitors’ belongings,
• temporary accommodation.

Keep in mind that adding extra cover can make your premiums more expensive.

How much does home insurance cost?

The cost of home insurance will depend on policy factors such as how much you choose to cover your home and/or contents for, how high the excess you choose is and whether you decide to add optional coverage. It can also depend on characteristics related to your home, such as where you live and whether you have any security features in place.

Canstar has calculated the average annual cost of home and contents insurance based on policies on our database. This is based on the sum insured values of between $300,000 $1,500,000 for building cover and $50,000 for contents cover.

Yearly home insurance costs

Source: www.canstar.com.au – 14/04/2025. Premiums based on quotes obtained for Canstar’s 2024 Home and Contents Insurance Awards and Star Ratings (September 2024), for a range of addresses, property assumptions and building sum insured amounts. Premiums based on building sum insured amounts between $300,000 and $1,500,000 and a contents sum insured of $50,000. *North QLD is defined as the portion of Queensland north of, but not including, Rockhampton.

If you’re looking to keep your costs down, you may be able to save on your premiums by buying your policy online or by bundling your home and contents insurance together.

How can I choose a home insurance policy?

When buying home insurance, it’s important to consider both price and features. Consider what type of coverage you want – for example, if you live in an area that is prone to flooding, you may want to choose a policy that offers flood cover as a standard or optional inclusion. It’s also important to carefully read the insurer’s product disclosure statement (PDS) so you have a good understanding of what you are and aren’t covered for.

A good place to start could be Canstar’s home insurance comparison tables, or reading about Canstar’s latest Home and Contents Insurance Star Ratings and Awards.

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Cover image source: Abdullah Durmaz/istockphoto.com