Home and contents insurance costs explained – a cost breakdown
Wondering how much home insurance costs? You're not alone. If you're researching the cost of home and contents insurance this article is a great place to start. You'll not only find out why home insurance can be so important, you'll also learn about some of the factors that contribute to home insurance costs and get a better understanding of options available to help manage the cost of your premiums.
9 minute read
What you'll learn
- Home and contents insurance, the basics
- Why having home and contents insurance is important
- What factors contribute to the cost of home insurance
- Tips to get value from what you pay for your home insurance premium
What is home and contents insurance?
Home and contents insurance is a type of coverage that financially protects both your house and your belongings. It’s like a safety net for your home and your personal belongings.
Home insurance
Home insurance (also known as home building insurance or building insurance) covers the physical structure of your house, like the walls, roof and floors. Home insurance can also cover your garage, shed, paths, and even your pool or tennis court (if you have one) among other things. If something bad happens, like a fire, storm, or vandalism, home insurance may contribute to the cost to repair or rebuild what’s damaged or destroyed.
Contents insurance
A contents insurance policy covers your personal possessions inside and around the house (or garage or shed). If your furniture, electronics, clothes, or other personal items are stolen, damaged or destroyed, contents insurance may help cover the cost of repair or the replacement cost of the items.
Having both home insurance and contents insurance means you’re covered for the building itself and your things inside and around your home. If you have adequate cover and an insured event happens, other than paying your agreed policy excess, you shouldn’t incur any additional cost to get things back to normal.
Why is home insurance important?
Home insurance is a handy way to protect your home and personal belongings against damage or loss. There is no way to predict what's going to happen in the future, so a home and contents insurance policy is a safeguard that can help protect you financially as you won't be out of pocket for the full replacement cost of any affected possessions or the full cost to rebuild your home if they’re damaged following an insured event.
Home insurance provides cover for your property
Home insurance protects against damage or loss caused by an insured event like a fire, storm damage, vandalism, theft and certain natural disasters. Basically, it is designed to help cover the repair or rebuilding costs following an insured event.
Contents insurance covers personal belongings
Contents insurance is designed to cover the repair or replacement costs of personal effects like indoor and outdoor furniture, electronics, clothing, jewellery and other items inside or around your home, if these items are stolen or damaged due to an insured event.
Home and contents policies almost always offer liability coverage
If this is included in your home insurance cover, it can protect you financially if someone gets hurt or their property suffers accidental damage while they are on your property.
Home insurance can act as a safety net
Home and contents insurance can help protect your home and your belongings against unexpected events. If you are robbed or a disaster happens, insurance can take care of some of the costs to repair the damage and you can focus on what matters.
It could be a condition of your mortgage
With most lenders, you need to have building insurance as a condition of the home loan so the property securing the mortgage is protected. This type of insurance policy covers building costs should the property be damaged or destroyed.
You can choose from a range of coverage options
From coverage limits, excess amounts, and additional things like cover for accidental damage, motor burnout on electrical appliances, temporary accommodation costs (if your home becomes uninhabitable), your home and contents insurance policy may offer optional cover to work with your insurance needs.
Home insurance policies are a great way to keep your house and your belongings covered in case the unexpected happens, like a natural disaster (insurance companies refer to any event that they cover as an insured event). It’s all about making sure you’re covered financially if something goes wrong, like a flood or theft. And as long as you have sufficient cover for your situation, it can provide a safety net so you can rebuild, repair or replace any damaged property and possessions without having to pay for everything out of your own pocket.
Home insurance cost and the factors that influence it
There are several things that can influence what home and contents insurance costs. If you understand these, you can make an informed decision about which insurance policies to get (and you may even be able to save time and money).
The key factors that influence home insurance cost include:
Where your home is located
If the property is in an area prone to natural disasters like floods, bushfires or cyclones your home insurance costs may be affected and you could have higher premiums.
Perhaps you live in a neighbourhood which is considered to have an increased risk of theft or vandalism, this too can influence your home and contents insurance cost.
What type of home it is
The building materials used to construct your home can affect how easily damaged it can be, for instance a wooden home could be more expensive to insure than a brick one. In addition, older homes may have a higher premium because of the increased likelihood of needing repairs.
The size of your home
The estimated cost to replace or rebuild your home in the event it is damaged or destroyed is a major factor that affects premiums. Larger homes or homes with solar panels or a pool could be subject to higher premiums too.
Whether you have security or not
Installing security screens and other security features like monitored alarms and deadlocks on doors and windows may help reduce your premiums.
The level of cover you choose
Comprehensive insurance policies that cover a wide range of insured events and risks are likely to be more expensive than more basic cover. Plus, the higher the excess you choose (the amount you pay when making a claim), the lower the premium may be.
If you add options like accidental damage or motor burnout, this is likely to affect your home insurance premium too.
Your claims history
When working out your premium cost, the insurer will look at whether you have a history of insurance claims and try to understand as many details as possible. If you have made a lot of claims in the past, you may be considered a higher risk. On the other hand, some insurers offer discounts if you haven’t made a recent claim.
Who lives in your home
The amount you pay for your insurance policies can be affected by whether your home is owner-occupied, rented or if it remains unoccupied for a period of time (say, longer than 60 or 90 days).
Minimising the cost of premiums through discounts
First and foremost, getting a good deal on home and contents insurance involves making sure you have enough cover for your situation. Depending on the insurer you choose, there may be options to reduce your premium through a range of discounts, based on eligibility:
Online discounts
If you purchase your policy online rather than in person or over the phone, you could be eligible for a discount.
Combined home and contents insurance discounts
Many insurers offer a discount to customers who take out both home insurance and contents insurance in one combined policy.
No Claim bonus discounts
Some insurers will reward you if you haven’t made any home and contents claims for a certain period, usually around five years.
Multi policy discounts
Your insurer may offer discounts if you bundle your home and contents insurance with other policies like your motor insurance or travel insurance.
Loyalty discounts
Ask your insurance provider whether they offer a discount if you have had multiple different insurance products with them over multiple years. Some still offer this, but many do not.
Some home insurance providers offer multiple discounts and the ability to stack them, while others take a simpler approach with a flat discount for things like online purchasing or a combined policy (some insurers offer no discount at all). It pays to check what’s on offer when you are researching.
Tips for Managing Your Premium
Insurance is a great way to manage risk, but it can sometimes seem pricey depending on the options you choose. We’ve already explored discounts that may be on offer, but if you're looking for ways to get lower premiums, here are some simple tips on ways you could reduce the cost of your insurance policies.
1. Increase your excess
Opting for a higher excess can sometimes reduce your premium, but it may mean you’ll pay more out of your own pocket if you need to make a claim.
2. Improve your home security features
Installing a security system is something many insurance providers look upon favourably. An alarm system can be one way to help lower premiums, but you need to weigh up the initial cost of this investment against potential savings.
3. Stay on top of property maintenance
Keeping your home in good condition won’t necessarily have any effect on the cost or your home insurance premium, it can definitely reduce the risk of your claim being reduced or denied when you make a claim.
4. Pay your premium annually
Some insurers charge you extra if you pay your premium by the month. If you pay the year’s premium in one go you can avoid this, but you need to make sure you have enough funds to pay a lump sum at the time your premium is due.
5. Review your cover to ensure it fits your needs
Weigh up whether your cover is right for you, including whether you still need any of the optional cover you have included like portable items or accidental damage cover.
6. Review your coverage amount (sum insured)
Regularly check your building and contents insurance policies to reaffirm your sum insured (the amount you're covered for) and make sure you are not overinsured. You should also be very careful to check you’re not underinsured, especially since the cost of building materials and goods has increased. In fact, according to a survey conducted for the Insurance Council of Australia, more than 80% of Australians could be ‘underinsured’* so make sure that doesn’t apply to you too.
What’s your home and contents worth?
Check out these home insurance calculators to help you estimate the cost of rebuilding or replacing your home and its contents. This can help you understand how much cover you need and make sure your sum insured is right for your situation.
Are you getting the most value out of your home insurance policy?
It is so important to review your home insurance cover regularly – both what is covered, and for how much (your sum insured). You can do your best to avoid the hassle of being under- or over-insured.
Thinking about comparing policies?
Find out if Westpac Home Insurance provided by Allianz, could be a good choice for your circumstances.
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Things you should know
The information is not advice, recommendation or opinion on any products or services provided by Westpac or third parties. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. For more information on any specific products or services distributed or provided by Westpac, you may wish to read the relevant Product Disclosure Statement.
Home and Contents Insurance is issued by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL 234708 (Allianz). Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (the Bank) arranges the initial issue of the insurance under a distribution agreement with Allianz, but does not guarantee the insurance.
This information does not take into account your objectives, financial situation or needs. Before making a decision, please consider the relevant Product Disclosure Statement. For more information call 1300 650 255.
If you take out Home and Contents with Allianz the Bank will receive a commission of up to 12% of the premium, excluding Government fees and charges, plus GST.
A target market determination has been made for this product.
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