Home and Contents Insurance in Australia: The Basics

🏠 Buildings vs contents: the difference🔗

These two types of cover protect completely different things. Understanding the split is the first step to buying the right policy.

Buildings insurance (also called home building insurance) covers the physical structure of your home: walls, roof, floors, ceilings, built-in fixtures like plumbing and cabinetry, the garage, fences, driveway, and an inground pool if you have one.

Contents insurance covers everything inside the home that you'd take with you if you moved: furniture, appliances, whitegoods, clothing, jewellery, electronics, musical instruments, artwork, and collectibles.

Most Australians buy buildings and contents together in a single combined policy. It's almost always cheaper than buying them separately, and it simplifies claims when both the structure and your belongings are damaged in the same event, a house fire, for example.

📋 What home insurance actually covers🔗

Standard policies typically cover the following events:

Usually covered:

• Fire and bushfire
• Storm, rainwater, and hail
• Flood (check your policy carefully, not all include it)
• Theft and burglary
• Malicious damage and vandalism
• Earthquake and lightning
• Escape of liquid, burst pipes and similar
• Impact damage, falling trees, vehicles

Extra benefits most policies include:

• Legal liability: if someone is injured on your property, cover for legal costs and compensation claims
• Temporary accommodation: if your home becomes uninhabitable after an insured event, most policies cover alternative accommodation, usually capped
• Debris removal: demolition and clean-up costs, though these need to be factored into your sum insured

What's usually NOT covered:

• Wear and tear or gradual deterioration
• Pest damage, termites are a classic exclusion
• Intentional damage by the owner
• Damage caused by the sea or tidal flooding
• Landslides and earth movement, check your PDS

Always read the Product Disclosure Statement before you buy. The Key Facts Sheet, which insurers are required to provide, is a useful starting point for comparing policies side by side.

⚠️ The underinsurance problem: Australia's biggest home insurance mistake🔗

This is the part most people skip. Don't.

Underinsurance is genuinely common in Australia, and most people who are underinsured have no idea. Multiple independent industry analyses and surveys have found a meaningful share of Australian homeowners are insured for noticeably less than their actual rebuild cost.

The reason it happens is simple: people confuse market value with rebuild cost.

Your home's market value includes the land. Insurance doesn't cover land, it covers the cost to demolish what's left and rebuild from scratch. That rebuild cost is almost always higher than what you'd sell the house for, especially after the construction cost inflation that followed COVID-19.

The coinsurance clause is the rule that bites you when you claim. Most policies include a coinsurance clause (also called an averaging clause), which kicks in whenever you're underinsured below a threshold, typically 80 to 90% of the true rebuild cost. It limits the insurer's payout to the proportion of the replacement value you've actually insured, and it applies to every claim, not just total losses.

MoneySmart's example makes this concrete:

Say your home costs $600,000 to rebuild, but you're only insured for $400,000. You're 33% underinsured.

• Partial damage: a tree falls on your garage, repairs cost $15,000. You claim $15,000, the insurer pays only 67% of that, $10,000. You're out of pocket $5,000 on a $15,000 repair.
• Total loss: your home is destroyed. You claim the full $400,000 policy amount. The insurer applies the coinsurance clause and pays only 67% of $400,000, $268,000. You need $600,000 to rebuild. You're $332,000 short.

That's not a technicality. That's the difference between rebuilding your home and not.

🔢 How to calculate your rebuild cost (not market value)🔗

The number you need is the rebuild cost: what it would cost to demolish the existing structure and build an equivalent home from scratch on the same site.

This is not the same as:

• What you paid for the house
• What it would sell for today
• What it's valued at for council rates

What to include in your rebuild cost estimate:

• Demolition and debris removal
• Actual construction cost, materials and labour
• Professional fees, architect, engineer, building surveyor
• Council fees and permits
• Fencing, driveway, and landscaping
• Any outbuildings, pools, or sheds

Most major insurers provide a rebuild cost calculator as part of getting a quote, and MoneySmart's guide to underinsurance walks through how to use one properly. If your home is unusual, built on a slope, made from non-standard materials, or significantly renovated, a formal valuation from a quantity surveyor or registered valuer is worth the cost, it's trivial next to the gap it could close.

Review annually. Building costs have risen significantly since 2020 and haven't stabilised. A sum insured you set three years ago is almost certainly too low today.

📦 How to calculate your contents value🔗

Most contents policies operate on a new for old basis. If your five-year-old TV is stolen, the insurer replaces it with an equivalent new model, not a depreciated payout. That means you need to think in terms of current replacement cost, not what you paid at the time.

The room-by-room method works best: go through your home room by room and list everything you'd need to replace if it burned down. Be thorough, people consistently underestimate how much their belongings are worth in total. Don't forget:

• Jewellery, often subject to single-item limits
• Electronics: laptops, phones, tablets, gaming consoles
• Musical instruments and sports equipment
• Art, antiques, and collectibles
• Clothing, a full wardrobe adds up fast

🎯 The essential: Most contents policies cap the payout for any single item somewhere in the low thousands unless you list it separately. Check your specific insurer's limit. Own a $5,000 engagement ring or a $3,000 camera? List those items specifically (sometimes called a "schedule" or "rider") to be fully covered.

🔍 Key policy features to compare🔗

Not all policies are equal. Here's what to look at beyond the premium.

Sum insured vs total replacement cover. Most policies are "sum insured," you nominate a dollar amount and that's the maximum payout. A small number of insurers still offer "total replacement" or "guaranteed replacement cost" cover as an optional extra, where the insurer agrees to cover the full rebuild cost regardless of the sum insured. These offer real protection against underinsurance, but they've become less common and generally more expensive since the insurance market hardened following the 2022 floods. Worth asking about directly if it's available for your property.

Excess. The amount you pay out of pocket when you claim. A higher excess reduces your premium, but make sure you can actually afford it in an emergency. There's no point saving a bit on premiums if you can't cover the excess when your roof comes off in a storm.

Flood cover. Not automatically included in every policy. If you're in a flood-prone area, check explicitly whether your policy covers riverine flooding (water escaping from a river or creek) as distinct from storm damage.

Portable contents cover. Standard contents insurance only covers belongings inside the home. Want cover for your laptop at a cafe or your camera on holiday? You'll need to add portable contents cover, usually an optional extra.

🏘️ Renters: do you need contents insurance?🔗

Short answer: yes, but not buildings insurance.

If you're renting, the building is the landlord's responsibility to insure. What you need to protect is everything you own inside it: furniture, electronics, clothing, jewellery, and anything else you'd take with you when you move. Contents insurance for renters works exactly the same way as for homeowners, the same single-item limits apply, the same "new for old" principle applies, and the same underinsurance risk applies.

If you're on the other side of this, renting out a property you own, standard home and contents insurance won't cut it. You need landlord insurance, which covers tenant-related risks that a standard policy excludes entirely: malicious damage by tenants, loss of rental income, and liability as a landlord.

Thinking about rentvesting? If you're renting where you live while owning an investment property, the insurance split matters: contents insurance for your rental home, landlord insurance for the property you own. Our full breakdown of what that landlord policy needs to cover is in landlord insurance in Australia.

❓ Frequently asked questions🔗