2025 home insurance trends and predictions

From tiny homes to new tech, there’s plenty happening in the world of home insurance, and 2025 looks like it could be another interesting year.

Last year, we didn’t get every prediction right (1.5 out of 3, if we’re keeping score), but hey, it’s not an exact science. This year, we’re back with a fresh batch of predictions, and we’re curious to see how they’ll hold up.

So let’s see what 2025 has in store!

1. Tiny homes to find their place in insurance

Housing prices remain out of reach for many Australians, and while the discussion around affordable housing often focuses on high-rises, another trend has quietly been taking shape—something you don’t need a developer for: tiny homes.

The problem? You can’t currently insure them properly. They don’t fit neatly into traditional home or caravan insurance policies, leaving owners without adequate options.

That might be about to change. Councils like Surf Coast Shire in Victoria and the Shire of Capel in WA are rolling out pilot programs to help tiny homes find their place. And believe it or not, there’s even a lobbying group called the Australian Tiny Houses Association.It looks like 2025 could be the year insurers finally step up to the plate. A true David vs Goliath moment for these tiny homes.

Prediction: In 2025, we’ll finally see an insurance product designed specifically for tiny homes.

2. AI and smart home security: slow but steady progress

Smart home devices, like the smart home sensors offered by tech-forward insurer Honey, continue to play a role in home security by detecting leaks, smoke or break-ins (while also potentially reducing your premiums). Meanwhile there are more advanced AI systems that go a step further by predicting risks or offering preventative recommendations. However, the cost and complexity of these advanced tools render them impractical for most residential purposes, and not particularly cost-effective for insurers to throw in as a perk for buying their policy. 

Prediction. In 2025, Australian insurers will not introduce major new AI-driven smart home features, focusing instead on refining existing offerings while testing advanced tech in limited pilots.

3. Digital twins: exploring the next step

Digital twins—virtual replicas of real homes—could change the way insurers assess risks and even help prevent damage. By combining 3D models, smart devices and environmental data, they give a much more detailed picture of a property.

The cost and complexity of these systems means that we’re only seeing it rolled out in commercial and institutional settings thus far. For example, Sydney’s Barangaroo precinct is using digital twins to track energy use, and Victoria has started exploring how they can improve project management.

With those large-scale systems already being developed, home insurers could piggyback on the progress, teaming up to run pilot programs and see what’s possible at the residential level.

Prediction: In 2025, we’ll see an Australian insurer partner with existing digital twin initiatives to test the technology on a smaller scale.

3. The ‘stratus’ quo 

Apartment living is on the rise, and strata insurance is facing more scrutiny as rising costs and limited options leave owners frustrated. This has even led the Insurance Council of Australia to step in with a policy paper outlining 17 ways to fix the system.

Still, with so many moving parts and entrenched processes, it’s hard to see major changes happening with strata - or strata insurance - anytime soon.

Prediction: In 2025, strata insurance will look pretty much as it does now—no big reforms, no major new competitors, just more of the same.

Now as we sit back and wait to find out what transpires over the coming year, why not check out some of the home insurance options available today?