What is home and contents insurance?

A home insurance policy covers you if the building that you live in is damaged or destroyed by an insured event, such as a fire, a storm, or a break-in. Similarly, a contents insurance policy covers you if the belongings you keep in your home are lost, damaged or destroyed in an insured event.

Each of these insurance policies can be purchased separately if required, or they can be combined into a single home and contents insurance policy, which may offer more complete coverage at a more affordable price than taking out separate policies.

When you’re comparing insurance options, remember that you’re not just looking for the cheapest home and contents insurance policy, but also considering how this cover will protect you. It’s important to compare home and contents insurance options from different insurers to get a better idea of which policies may best suit your needs.

What’s included in home and contents insurance?

Home insurance (sometimes called home-only insurance or building insurance) covers your home’s physical structure, as well as other structures on your property, such as garden sheds, fences, and swimming pools.

Contents insurance covers the belongings you keep in your home, from your furniture and appliances to your clothes, electronics, books, and ornaments.

The policy should cover your home and contents against a variety of insured events, which may include:

• Storm and rainwater (flood cover may be optional)
• Fire (including bushfires)
• Theft and break-ins
• Escape of liquid (e.g. burst pipes)
• Lightning (including fusion damage)
• Impact damage (e.g. fallen tree)
• Breaking glass, ceramic and sanitary fixtures
• Malicious damage, vandalism, riots or civil commotion
• Explosions
• Earthquake or tsunami

Not all insurers cover the same events, and many define insured events differently. There may also be specific exclusions in your policy. Remember to check the Product Disclosure Statement (PDS) for details.

For your home insurance, you’ll often have the choice between Total Replacement cover and Sum Insured cover. The former is often more expensive, but is more likely to cover the total cost of rebuilding your home if it is destroyed in an insured event. The latter will pay you out a lump sum of money up to a previously agreed maximum amount – you can choose a smaller sum insured to keep your premiums lower, though you could risk being underinsured if the worst should occur.

Similarly, contents insurance may offer new-for-old replacement cover, or Sum Insured cover. The former means if your belongings are damaged, lost or destroyed in an insured event, the insurer may replace them with their equivalent new models. The latter should pay you the value of the goods that are lost or damaged to help cover the cost of their repair or replacement, though you risk potentially being underinsured. Keep in mind that some high-value contents may need to be insured separately or specifically added to your policy, which could increase the premiums, and contents that leave your home such as mobile phones, laptops, or jewellery, may not be covered by your contents insurance unless you specifically take out portable contents cover.  

When do I need home and contents insurance?

Unlike car insurance, home insurance is not compulsory in Australia. Depending on your living situation and personal budget, you may be able to live without an insurance policy in place on your home and or its contents, though you risk being out of pocket if the worst should happen.

Several mortgage lenders require home buyers to have a home insurance policy in place as a condition when applying for a home loan. This helps to reduce the lender’s risk of ending up out of pocket if the property used to secure a loan is damaged or destroyed.

If you’re a renter, you likely won’t need combined home and contents insurance, as your landlord is responsible for insuring the property you live in. But if you want your possessions to be covered for the risk of loss or damage, you could consider applying for a contents-only insurance policy for renters.

Similarly, if you’re an investor, you may not need a combined home and contents insurance policy for your investment property. A home-only insurance policy can cover the property itself, while the tenant is responsible for insuring the belongings they keep in the home. Some insurers offer specific landlord insurance policies that also cover events like damage caused by tenants, non-payment of rent, and the like. You may only need a contents policy on your investment property if you offer it as a furnished dwelling.

How much can home and contents insurance cost me?

The cost of home and contents insurance can vary greatly. The value of your home and its contents, as well as the risk profile of the area where your home is located, among other factors, can contribute to the cost of your home and contents insurance premiums.

For example, according to the ACCC, the average premium in 2021–22 for residential combined building and contents insurance was $1350. However, in areas of northern Australia that are vulnerable to natural disasters such as severe flooding, the average premium was around $2370.

Similarly, the ACCC found that the average premium per $100,000 sum insured for residential combined building and contents insurance was approximately $420 in northern Australia in 2021–22 – more than double the rest of Australia, which paid around $190.

The ACCC also found that average insurance premiums have risen much faster in northern Australia than in the rest of the country:

“Between 2007–08 and 2021–22, average residential combined home and contents insurance rose over 130% in northern Australia in real terms (or by an average of around 6% per annum), compared to around 80% for the rest of Australia (an average of around 4% per annum). For building only insurance, the increase in northern Australia is over 200% compared to around 120% for the rest of Australia, in real terms.”

To get an idea of how much a home and contents insurance policy may cost you, you could contact several insurers for quotes and compare what they offer. Depending on your situation, some policies may offer more value than others.

If you want to lower the cost of your home and contents insurance, some of the options you could consider include:

1. Taking out multiple policies from the same insurer (e.g. home insurance and car insurance) to claim a multi-policy discount.
2. Sticking with the same insurer for several years to access a loyalty discount (if available).
3. Choosing a higher excess, which will reduce your premiums but increase how much you pay out of your own pocket when you make a claim.
4. Protecting your home from insured events e.g. add security systems to deter theft, or clear nearby vegetation to reduce fire risk.
5. Comparing home and contents insurance options each time your policy comes up for renewal – an alternative insurer may be able to offer a better deal for your situation.

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