Is home insurance worth it? How to find good coverage with good value

There’s a general distrust of home insurance. After all, “Isn’t it better to save your money for a rainy day instead of spending it on a policy?” 

It’s a legitimate question, especially with the cost of living and home insurance premiums climbing higher and higher. A home and contents policy can seem tempting to ditch – or not have at all.

But let’s seriously investigate the question. In order for insurance to be ‘worth it’, it has to occupy the sweet spot between good value and good coverage for your individual needs. 

However, since every homeowner is different – and every household faces different risks –  the price and coverage available to someone can vary enormously between providers.

So is home insurance worth it? Let’s look at some of the best reasons why it could be.

The cost of replacing your building and valuables can add up fast. If you sit down and do the maths, how much money would it actually take to buy everything you own if you lose it in a flood or bushfire? 

For example, take a look at the contents of your home and calculate the cost of replacing your:

• Furniture
• Clothes
• Appliances
• Electronic devices
• Books
• Cookware
• Indoor plants
• Artworks
• Jewellery.

Consider what you spent on them originally. Insurance is designed to reset you to the status quo, so you’re figuring out the cost of replacing everything with an exact or comparable value copy.

Then for your building, add up the money required to commission, design, construct, and install fixtures in your replacement home – exactly as it was. This can include everything from the process of hiring an architect to buying materials to housing yourself as your home is rebuilt. 

Once you have these estimates, this gives you a rough idea of your ‘sum insured’, or the amount of money you’d theoretically need to restart your home. If you have this amount in savings, then you probably don’t need insurance. 

If you don’t, then home insurance is definitely something to consider.

Living in a low-risk area in a well-maintained, secure building makes you more likely to get a cheaper home insurance premium. This is because your ‘risk profile’ shows that you’re not likely to make a claim, and therefore less expensive to insure from the provider’s point of view. 

It may seem counterintuitive. After all, if something isn’t likely to happen, why invest in a policy protecting you from the worst-case scenario? 

It all comes back to value. If your home carries less risk, then you can get a similar level of coverage to other customers but for less money. Your coverage is better value because you’re low-risk. 

So if your premium is likely to be low, the benefits of a policy could far out-value the money spent to have them. Before signing up, get a closer look at the inclusions and exclusions of a home insurance policy by reading the product disclosure statement (PDS).

Many home insurance policies come with discounts or a free period of coverage, and these can increase their value to the customer. Some of the most common home insurance discounts include:

• Online discount. Signing up online? Some providers offer money off your first year premium for doing so.
• Combined policy discount. Having multiple insurance policies from one provider – called ‘combined insurance’ – can be a great way to save. The most common combinations include home and contents insurance and home and car insurance. 
• Policyholder specific discounts. Depending on your demographic or situation, you may be eligible for individual rewards and discounts, like a senior discount. These are highly dependent on the provider, however. 

Some insurance companies also offer rewards programs for customers who actively reduce their risk, so it’s always worth comparing what’s available to you by getting home insurance quotes. Once you do, you can get an idea of whether your home insurance is good value – and therefore, worth it. 

Compare home and contents insurance policies below.