Answers to 5 common home insurance questions

7-minute read

What you’ll learn

• What is home and contents insurance?
• Why do I need home insurance cover?
• What does home insurance cover?
• What isn't covered by home insurance?
• What is a premium, excess, sum insured and insured event?

 

1. What is home and contents insurance?

Put simply, it's a type of insurance policy that covers your home (the building itself) and its contents (the things inside it) against loss or damage. This can range from sudden or unexpected events like fire and floods to accidental damage and theft.

2. Why do I need home insurance cover?

Home insurance helps put property owners at ease knowing their home and/or contents are insured against an unforeseen insured event. For example, imagine a storm caused damage to your home and left with you without power, resulting in food spoilage. Home insurance could cover the cost to repair your house from certain types of damage caused by the storm and contents insurance could cover the costs to replace the spoiled food, if you choose to make a claim.
 

Hot tip: If you have a mortgage, it may be a condition of your loan to hold a home building insurance policy.

3. What does home insurance cover?

Every insurance policy is different, however most home insurance issued anywhere in Australia will offer:

Building insurance

Building insurance is designed to cover loss or damage to the physical structures and permanent fixtures of your home. This may also include your garage, fences, driveway and even built-in appliances like hot water systems and air conditioners.
 

Building insurance will usually cover the cost to repair or replace damage caused by unexpected events like a burst pipe, fire or natural disaster. This type of property insurance usually won't cover you for preventable issues such as general wear and tear and termite damage.
 

Hot tip: Look for a policy that covers the costs of temporary accommodation for up to a year if you're unable to live in your house as a result of serious damage caused by an insured event.

Contents insurance 

A contents policy covers the belongings you have in your home (also known as the insured address). For example, your furniture, carpet, appliances and even your clothes, shoes and handbags.
 

Hot tip: Most policies have minimum premiums and insured amounts.

Legal liability cover

This type of cover is often included in building or contents insurance policies. If someone is injured or passes away from an accident at your insured address, legal liability cover may help cover legal costs for the compensation of personal injury. You can find full details of any legal liability cover included in your Product Disclosure Statement.

Optional cover

In addition to building and contents insurance, most providers will also offer optional cover so you can tailor your insurance policy to your particular objectives and financial situations. Types of optional benefits include:

Accidental damage cover

Helps cover you for accidental damage to your home that is caused unintentionally. For example, this may cover accidentally broken glass so you don't have to pay for the cost to repair.

Motor burnout cover

Cover for electrical current damage to your home electrical motors found in items like fridges, freezers and washing machines.

Portable contents cover

Cover for portable items that are designed to leave your insured address with you. There are usually two types of cover:
 

• Unlisted portable contents insurance - includes items like suitcases, bags, clothing, cosmetics, bicycles, cameras and musical instruments. For example, if you took a short holiday anywhere in Australia and lost your suitcase containing your clothing and camera you may be covered for the replacement of these contents items. You could receive a cash settlement for the replacement of your belongings up to the available limits of each type of item and the combined total sum insured.
• Listed portable contents insurance - allows you to insure specific items that can be taken out of the house. Some items may be automatically included in portable contents cover, or you may need to specify them. For example, certain items like mobile phones and laptops may need to be listed on your policy in order to insure them against loss or damage.
   

Hot tip: You'll be asked to provide evidence of the cost and ownership of portable contents items if you need to make a claim.

4. What isn't covered by home insurance?

Items not covered by home insurance are called 'exclusions'. Typically, exclusions apply to all home insurance products. Common exclusions include damage to your home due to routine wear and tear or lack of proper maintenance, and certain high-value items that may require additional coverage.
 

Remember, it’s your responsibility to update your insurer about any changes to your property and policy including any renovations, any changes in contact details, or any extended periods of time your property is not inhabited. If you fail to update your insurer you may not be covered.

5. What is a premium, excess, sum insured and insured event?

Like many industries, insurance contains jargon that can be confusing. We've explained some of the more common terms to help you:

Premium

A premium is the amount of money you pay to have the insurance coverage. In most cases, you can pay your premium annually, but many insurers allow you to pay by the month which can help customers in different financial situations. Just make sure you check if your insurer charges extra to pay by the month before switching from annual payments.

Minimum premium

A minimum premium is the lowest amount you'll pay for home insurance regardless of other factors that may affect how much your insurance costs. It's the lowest price that can be paid for a specific type of cover.

Excess

The amount you contractually agreed to pay when you make a claim. You can sometimes raise your excess, which may help lower your premium.

Sum insured

The sum insured refers to the maximum amount of money that an insurance policy will pay out if you make a claim. This amount is agreed upon by you and your insurance company at the start of your policy and is crucial in determining both the extent of your cover and the premium you are charged

Insured event

An insured event is a specific situation or occurrence that your insurance policy covers. Think of it as the trigger for your insurance to kick in so you can make a claim. These events can vary depending on your policy but typically include things like theft, fire, a burst pipe and other unexpected events. For example, if your house catches fire, you can make a claim for the loss or damage to your home up to the sum insured.