Helpful tips for choosing a home insurance policy

There are two main types of home insurance coverage to choose from.

The first involves coverage for the “total replacement” or actual cost of rebuilding your home. This may also cover any rise in material prices or your expenses towards renting a temporary home. However, you may pay a higher premium for this type of insurance. 

The other type of home insurance policy will cover an insured sum, which is an estimate of the cost of rebuilding your home. Such an estimate may fall short of the actual cost, which could leave you underinsured. However, you may pay less for a home insurance policy covering an insured sum.

While your home is likely your most precious asset, your belongings can also be expensive, as well as having sentimental value. High-end smart televisions, laptops, or precious collectibles can be difficult to replace. If you’re concerned about protecting such objects, you may want to consider buying home and contents insurance. 

Home-only insurance could be helpful when you want to insure a property’s bricks and mortar but not its contents, such as if you’re the landlord of an investment property, or if you want to manage your contents insurance separately. Similarly, contents-only insurance could be valuable for renters who don’t own their home but still want to protect their possessions, or for owner-occupiers of strata units whose home is already covered by strata insurance.

You may need to compare several home and contents insurance policies to see which offer adequate coverage for various items against different damaging events. While you may be able to customise your policy, some high-value items may require you to buy additional coverage or a separate standalone policy.

The average home and contents insurance policy may only cover damage caused by accidents, while damage arising from gradual wear and tear may not be covered. For instance, water damage caused by a pipe bursting may be considered accidental damage, whereas seepage from a damaged pipe may be seen as gradual damage. 

When you file an insurance claim for accidental damage, your insurer will likely send an adjuster to verify that the damage is indeed unintentional, and not the result of negligence either. As a homeowner, you’re responsible for your home’s maintenance to prevent leaks and seeps, as well as infestation by vermin. 

When you shop for a home insurance policy, consider checking which insurers offer coverage for the events most likely to occur in your neighbourhood. This may include natural disasters like floods, bushfires, and storms as well as human incidents like theft, vandalism, and civil commotions. 

Living in an event-prone area can mean you’ll pay more for home insurance, which is why you need to make sure your insurance policy covers your home to the maximum extent possible. You can also go through the insurer’s Product Disclosure Statement (PDS) to learn more about the limits of the policy’s coverage for different events.