Just the facts please: are these home insurance myths costing you money?
When was the last time you thought about what it would cost to rebuild your home from scratch? Doing so could be the difference between being fully covered by your home insurance and ending up thousands of dollars out-of-pocket. This is especially important as weather events increase in scope and severity, and construction costs continue to climb.
Given these stakes, it’s important to change your assumptions about how home insurance works. To help you, we’re going to bust a few myths that might be keeping home owners under water.
Myth 1: I have to wait for my renewal date to switch
Choosing to pay your premium annually doesn't lock you into that policy for the full year. You still have the freedom to cancel at any time.
If you switch, your insurer will provide a pro-rata refund for the unused time. There is usually a small, fixed cancellation fee, but this often won't be much more than a few months' worth of your annual discount. You'll find the exact figure in your policy documents, but the freedom to move to a better and/or cheaper home insurance policy could very well be worth this minor cost.d
Myth 2: If I switch, I lose my ‘no claims discount’
The fear of losing a hard earned discount is, thankfully, unfounded since your history as a safe homeowner is generally portable. If you move to a new insurer that also offers a ‘no claims discount’ (or ‘no claims bonus’), you’ll just need to provide your new provider with proof of your claims history, which you can get from your previous insurer.
Myth 3: My sum insured automatically covers rising building costs.
ABS data still points to rising construction costs, which means it's probably becoming more expensive to rebuild your home from scratch if the worst happens. And to add insult to injury? You’re not always automatically covered for these surges.
If something happens to your home and you’re underinsured, you could end up on the hook for thousands in extra costs. To prevent this, you’ll need to update your policy every year to account for rising construction costs. Another strategy is to pay a bit extra for ‘underinsurance protection’, an add-on that will typically provide an extra 25% to 30% on top of your sum insured.
Myth 4: A standard policy covers me for all natural disasters.
Insurance policies cover a wide swath of natural disasters, but that doesn’t mean they cover them all. For example landslides are almost never covered when they occur on their own; floods may not be covered unless you have the flood add-on; and certain ‘actions of the sea’ can likewise be excluded. The only way to truly know if you’re covered for a particular natural disaster is to consult your policy documents or ring up your insurer for clarification.
Myth 5: All insurance providers are the same
Don’t just assume all home insurance policies are created equal. Just as every home is unique, each insurer designs their policies differently, with their own rules for what they will cover and how they price it.
This is why it’s so important to shop around. A good strategy is to create a shortlist by first comparing the details of a few policies, looking at their inclusions, exclusions and overall level of cover. Then get quotes for the ones you like so you can compare them accurately on price.
If you're unsure where to start, the 2024 Mozo Experts Choice Awards for Home Insurance is a great place to start. There you’ll find our winners for Best Quality Home Insurance and Best Value Home Insurance as determined by our experienced team of data experts.
Bottom line
Don't let outdated myths put your home and financial security on shaky ground. The best way to ensure your foundation is solid is by regularly reviewing your level of cover, understanding the details of what you're paying for, and taking the time to compare your options.
With that in mind, here are some policies you might like: