The complete home and contents insurance guide: from picking a policy to making a claim
If you’re like most people, your home is probably not only one of the most expensive things you’ll ever own, but also one of the most important to you. You probably put a lot of thought into finding the right one and a lot of effort into saving up and choosing a home loan to afford it.
So once you’ve found your home and filled it with everything you love, why would you leave it unsecured? That’s right - you wouldn’t.
Which is why you need home insurance, and why you’re reading this guide. This is Mozo’s complete guide to home insurance, so we’ll cover everything from the definition of a home insurance policy, right down to how to make a claim if you need to.
Ready to start your search? Check out below.
What is home insurance?
Home insurance, which you might also know as property or building insurance, is protection for your home and can help to cover the cost of unexpected damage to your house and garage. It can protect you from things like vandalism, theft or natural disasters.
Contents insurance covers everything inside your home, so it protects your possessions from the same things.
These two insurances are usually bundled together and sold as “home and contents” insurance. They’re designed for private residences - business owners looking to insure their building need to look for commercial property insurance instead.
Why do I need home and contents insurance?
You’ve got so many bills to pay, and home insurance probably seems like just another one on top, right? Well, like most insurance covers, home insurance may seem like an annoying cost - until you need it, at which point you’ll be glad you won’t have to replace your home and everything in it using your emergency savings.
Here are some of the benefits to having home insurance and why you should start thinking of it as an important part of your budget if you don’t already.
To keep your home and valuables safe. This is the reason most people think of when they decide to take out home insurance. Things like theft, fires, floods and storms can affect anyone’s home, and if it does happen to you, home and contents insurance will cover the cost (or at least some of the cost) of replacing or rebuilding.
To protect against liability. If a neighbour trips on your front step and breaks their leg, you might be liable for their medical bills. Home insurance will often cover those costs so your savings don’t have to.
To keep your premiums low. Here’s the thing: if you let your home insurance lapse now and go without for a few months, a year or even a decade, then if you decide to take out a policy down the track, you might find yourself classified as high risk and your premiums will likely be higher. Why? Insurers might look at your lapse as evidence that you couldn't pay your premium, and assume that you might end up in the same situation again.
To keep your home loan lender happy. Still paying off your home? Chances are, your lender will require you to have a level of home insurance cover that’s at least enough to cover the value of the building. That’s because, as long as you haven’t paid off your home loan in full, the bank stands to lose money if your property is destroyed.
Types of home insurance
Not all home insurance policies were created equal - there are a few different types of cover, and it’s important to choose the one that applies to your situation. That way, you’ll be covered for the right things and up to the right limits if you ever have to make a claim.
Here are some of the main types of insurance covers you might come across which come under the umbrella term of “home insurance”, but are different in what they cover and who needs them.
Building insurance is the element of home insurance that covers the actual structure and permanent fixtures of your home, including:
- doors and windows
- fitted kitchens
- built-in cupboards and bathroom suites
Things like gazebos, garages, fences and sheds are sometimes covered as well, but it’s worth checking with your provider to be sure.
Usually, building insurance will cover costs from accidents or disasters including flood, fire, storm damage, theft or vandalism.
Contents insurance usually comes in a bundle with building insurance, under the umbrella term “home and contents insurance”. But it is a separate product, which you can buy on its own if you want to - for example, if you’re renting and don’t own the building you live in.
Basically, contents insurance covers the cost of repairing or replacing your possessions if they are damaged or stolen while they’re in your home. Some of the things covered by your contents insurance include:
- White goods
- Computers and other electrical appliances
- Sporting equipment
One important thing to know is that there are two different types of contents insurance you might take out. The first is sum-insured or otherwise known as “replacement value” cover, which will cover the value of your possessions, taking into account depreciation.
The other type is total replacement or “new-for-old”. This means that if your possessions are damaged or stolen, your insurance covers the cost of a brand new replacement. Sounds good, but keep in mind you’ll pay a higher premium for this type of policy.
Here’s an example of how the two might compare:
* Please note: Prices and values in this scenario are indicative only and should not be considered a real insurance quote.
If you’ve invested in a rental property, you can keep it safe by taking out landlords insurance. This policy should cover things like rent default, damage or destruction to the building and legal liability in case anyone is injured or dies on your property.
Some of the key things to know about a landlord's insurance policy are:
- Your insurance will generally cover damage caused by tenants, but keep in mind you could pay an extra premium for this.
- One of the most important parts of landlord’s insurance is that it will often cover rent default. Here’s the catch - either, your insurance will only kick in after about four weeks of the default, or your premiums will be about equal to four weeks rent. That’s why it’s a good idea to get four weeks of rent upfront as bond.
- In case of a disaster like flood or fire, many policies will also cover the loss of rent while your building is uninhabitable.
- Insurance for flats or units will be different than for houses, mainly because the actual structure of a unit is insured by a body corporate. While that’s fine, you may want to look at extra specialist insurance, usually called “strata title protection”, in case the body corporate doesn’t have adequate cover. This might be especially important if you’ve upgraded parts of your unit.
- Remember that even though you’re not living in the property and keeping your possessions there, you’ll probably need contents insurance as well, to cover things like curtains, carpets, light fittings and any appliances that you’ve supplied for your tenants.
If you’re renting, you may think insurance is your landlord’s problem. Well, think again. Although the actual building isn’t your responsibility, you’ll still need some level of insurance, largely because landlord's insurance doesn’t extend to tenants or their property. That means getting renters insurance, which often includes the elements of:
- Personal property cover
…which insures, you guessed it, your personal property, like furniture, tech gadgets or clothing. If your stuff is unexpectedly damaged or ruined, it could put a real dent in your savings trying to replace or repair it. This is basically contents insurance, so it’s important to get the right limit of cover for your belongings.Liability cover
Accidents happen - maybe an acquaintance trips on your stairs, or your son throws a ball through the neighbour's window. Liability cover will help to protect you from footing the bill all out of your own pocket. Remember that while your landlord's insurance may cover any injuries you sustain while in the property - it usually won’t cover your guests, which is why it’s important you have your own renter’s insurance policy.
- Additional living costs
If your rental property is damaged, say in a flood or fire, and you can’t live there for a time, your renters insurance will often help cover the costs of alternative accommodation. Plus, if staying in a hotel for a few months while your rental is fixed up means your food budget skyrockets (hotel kitchens aren’t exactly equipped for family meals, and all that takeout doesn’t come cheap) the insurance will likely cover that too.
Case Study: What happens when Claire’s rental is broken into
Home and contents insurance jargon buster: key terms to know
Home insurance comes with its own lingo, which can be confusing, especially if you’re buying a policy for the first time. Don’t get tripped up by the technical terms - check out our jargon buster before you go wading through the fine print.
|Accidental Damage||This covers things like spilling red wine on the carpet or a plasma TV falling off the wall. It generally is offered as an optional cover, and usually comes with a higher premium.|
|Appraisal||If you need to make a claim on your policy, the insurance company will likely require a professional appraisal of the damage or the original value of your building or item before they’ll pay the claim.|
|Building Replacement Value||This is the amount it would cost to rebuild your house completely at current market prices.|
|Cancellation||Your insurer can sometimes cancel your policy before the agreed date - most often, this will happen if you haven’t paid your premium.|
|Claim||If your home or belongings are damaged or stolen, and you want your insurance to cover the cost or part of it, you’ll need to make a claim.|
|Contents||Is most of the things inside your house. Usually includes personal possessions like clothes and electronics, as well as white goods, appliances, furniture, curtains and carpets. Make sure you check your policy PDS for a full list of what counts as contents.|
|Duty of Disclosure||You have a duty of disclosure, which means you need to tell your insurer the truth about anything relevant to your policy. If you don’t your coverage could be cancelled, or your claims could be denied.|
|Excess||When you make a claim, there’s a certain amount you have to pay, out of your own pocket before your insurer pays anything. This is called an excess, or sometimes a deductible. This is usually anywhere from around $100 to $2,000. Generally speaking, the higher your excess, the lower your premium will be.|
|Exclusion||Sometimes, there’ll be certain things that are specifically not covered in your home insurance policy. Some common examples of these exclusions include illegal items, previously damaged items, deliberate damage on your part or damage caused in the process of cleaning or maintaining an item.|
|Flood||For the purposes of your insurance, a flood is defined as water that has escaped the usual confines of a lake, river, creek or any other natural body of water, or a reservoir, canal or dam. If your policy includes flood cover (most do these days) you'll likely be paying a slightly higher premium for it.|
|Lapse||If you stop paying your premium, your cover will be suspended for a time, and this is called a lapse.|
|Liability coverage||This covers the costs - usually including legal and medical expenses - for any bodily injuries or property damage caused to others while they’re on your property.|
|Market value||The market value refers to the current value of your property, including the land and any buildings on it.|
|Non-renewal||This is similar to cancellation, but this means that your policy will reach its end as agreed, and then your insurer can decline to offer you an insurance policy again.|
|Old-for-new cover||This term usually applies to contents insurance, and means that your damaged or stolen item will be replaced with a new one, regardless of its age, or wear and tear. Usually, old-for-new policies come with a higher premium than sum-insured policies.|
|Optional Cover||You can add extra optional cover to your policy to cover events (such as flooding or earthquakes if you live somewhere where they are common) or items (such as jewellery or special collections.) Keep in mind, this usually means paying an extra premium as well.|
|Premium||Basically, you can think of this as the price of your home insurance policy. It will vary depending on a few things, like your level of cover and excess.|
|Product Disclosure Statement (PDS)||A PDS is the document which lays out all the important terms and conditions relating to your insurance policy. Make sure you read it carefully, so you’re well versed in the fine print.|
|Sum-insured||A sum-insured policy covers your home and contents for damage up to a certain dollar amount, and takes into account the depreciation of items.|
|Supplementary costs||Costs that come about because of a claimable event (like a natural disaster or a break in), but aren’t directly related. For example, if your house floods, there are the direct costs to rebuild, which your insurance will cover, as well as supplementary costs like paying for a hotel while your house is uninhabitable. Some policies will cover these extra costs, but others don’t, so make sure you check who’ll be footing the bill.|
|Total replacement cover||This is basically the same as old-for-new cover, but is generally used when referring to coverage of the actual building. A total replacement policy will cover the entire cost of rebuilding or repairs.|
Features of home insurance
Although different types of home insurance will apply in different situations and to different people, there are some features that pretty much all policies will have, and which you need to be aware of.
Here are some of the main ones and what they mean for you.
The premium is how much you pay for your home insurance. The price will depend largely on how likely the insurer thinks it is that you’ll make a claim in the future.
While this is sometimes hard to work out - after all, you can’t plan for an accident or disaster - there are some things insurers use to give an indication of the likelihood of a claim, including the location of your home and your claim history.
How does the insurer set home insurance premiums?
While each insurer will probably have a slightly different process for working out what your premium should be - that’s why you’ll get different quotes when you shop around for home insurance - there are some basic things that are common to most of them.
These common factors that could affect how high your premium is, include:
- The level of cover you have chosen - this includes for your property and belongings, as well as liability cover.
- Any optional cover that you’ve chosen. For example, if you have an expensive item like sports equipment or jewellery that is worth more than the limit of cover for a regular policy, you can choose to insure it to a higher level for an extra premium.
- What your home is made out of. A home made mostly out of flammable materials such as wood, will usually mean a higher premium than one made out of something less damageable, like brick.
- Where your home is. If you live in an area with a high crime rate, or a high likelihood of flooding or bushfire, your premium will likely be higher.
- How old your home is. Older homes may pose more of a risk, and therefore cost more to insure.
- Whether you’ve made a claim before. Previous claims sometimes indicate to the insurer that your property has issues that make you more likely to claim again.
- How you pay your premium. You can often choose to pay your home insurance monthly or annually and generally speaking, paying in a lump sum each year will save you money.
- Your excess. If you elect to have a higher excess, your premiums will go down and vice versa.
Why has my premium gone up?
You might have noticed that when you renew your insurance, your premium sometimes rises, even if you haven’t made a claim, or changed any of your circumstances. Unfortunately, there’s nothing you can really do about this, since it’s tied up with the costs of doing business for your insurer and the wider market conditions.
Here are some of the reasons your premium might have gone up.
- Changes in government policy. If any new taxes, levies or duties have been introduced, you can expect to be footing the bill.
- Inflation. Insurers often need to adjust premiums to keep up with inflation.
- The number of recent claims. Not only do your past claims affect your premium, but so do the number of overall claims an insurance company has had in the last year or so. If there have been a lot of claims, your insurer may need to raise premiums to restore the funds they use to make payments.
- Poor investment returns. Insurers will often invest the premiums you pay, so they can make extra money to pay out future claims. If those investments aren’t performing well, your premium will rise to make up for it.
- Cost of business might have risen for your insurer, and guess who gets to cover that cost? That’s right, you do, in the form of higher premiums.
There are also some reasons for a rise in your home insurance premium that you do have some control over, such as an increase in your individual risk (usually because you’ve made a claim or your circumstances have changed somehow) or you may be insuring something more valuable than before. For example, if you’ve recently tricked out your home office with all the latest gadgets, your contents insurance premium will rise.
That’s why it’s a good idea to review your insurance at the end of each year and compare your renewal offer against the other deals on the market. There just might be an option out there that could save you hundreds or even thousands of dollars.
In a nutshell, the excess is the amount you have to pay if you make an insurance claim. So, say for example, your neighbour throws a ball through your window and you want to claim it on your insurance. If the window is worth $500 to fix, and your excess is $200, your insurer will keep the $200 and give you $300 to fix the window.
The other thing you should know, is that you can choose the level of excess you pay. If you opt for a low excess, you’ll generally pay higher premiums. But on the flip side, choose a high excess, and your premiums will be low. Here’s an example:
It can be tricky to decide which excess is right for you but keep in mind that securing the lowest premium by pumping up your excess is not always the best move. It will mean that your insurance company will pay you less money in the event of an emergency - which is when you need it most!
Limits of cover
The limit of cover is the highest amount that your insurer will pay out on a certain insured item when you make a claim on your home insurance. So, for example, your policy might have a limit of $10,000 on home office equipment. That means if your home office is broken into, you can only claim up to $10,000, even if $12,000 of computers, scanners, printers and other equipment are stolen.
Limits aren’t always dollar figures - if your insurance policy covers the fence surrounding your property, there might be a limit of up to 500 metres covered. So if your fence was 550 metres long and the whole thing had to be repaired after a storm, you couldn’t claim for 50 metres of it.
How your home insurance policy works
Now let's get down to the nitty gritty of your home insurance policy. It’s important to have a good understanding of your policy and how it works, so that you know what you’re covered for and what might stop you from making a successful claim. The last thing you want is to be left with a huge repair bill because you didn’t read the fine print!
What’s covered by your home insurance policy will depend on which policy you choose, which insurer you go with and the level of cover you opt for. Having said that, here are some of the things that should be covered by almost any home insurance policy:
- Theft or vandalism.
- Storm damage, including falling trees or branches, lightning, ice, snow, and rain.
- Fire damage or destruction, excluding melting or singeing. Smoke damage is generally included except when it was caused by prolonged exposure, for example, if your wood heater pumps smoke onto your ceiling and damages it, that usually won’t be covered.
- Sudden damage to plumbing, heating, air-conditioning or sprinklers.
- Flood cover is included in some policies, and in others it’s an optional extra that you can purchase for a higher premium.
- Accidental loss or damage, such as the breaking of glass is mostly covered, but some policies exclude it, so be careful!
Got something special? You can also opt to purchase extra cover for valuable items, such as jewellery, antiques, collectibles or sports equipment. Keep in mind that this will mean higher premiums (in some cases much higher).
Just as important as knowing what is covered by your home insurance, is knowing what isn’t. Here are some of the major general exclusions to home insurance that you should be on the lookout for.
- Lack of security. You need to make sure your home security is up to scratch to make sure your insurance policy will cover any incidents. If something is stolen because you routinely don’t lock your doors, chances are you won’t get an insurance payout.
- Leaving your home empty. If you go away for an extended time (usually more than 60 days) and leave your home empty, any damage or destruction that occurs while you’re gone won’t be covered.
- Home-swaps. Home-swaps are a great way to have a cheap holiday! But remember that if you have a home insurance claim that arises while someone else is living in your home, it likely won’t be successful.
- The ocean. Been dreaming of a seaside bungalow? Keep in mind that generally, anything related to the ocean or its movements won’t be covered.
- Illegal practices. First things first, if you’re doing something illegal - like selling or growing illegal substances - that won’t be covered. That’s a bit of a no-brainer. But did you know that if your home doesn’t meet the legal requirements around things like pool fences, smoke alarms or balcony railings, then your home insurance could become void.
- Extensions, alterations, renovations. If you’re doing a reno and something goes wrong - say you crack open a wall you shouldn’t have, or someone breaks in through a half renovated room you can’t lock up properly - it generally won’t be covered by home insurance.
- Deliberate damage. Anything you or someone you’ve let into the building do on purpose isn’t covered by your policy. In fact, if you try to claim it, it might even be considered fraud.
- Neglect. To claim on your home insurance policy, it’s expected that you’ll have been doing ongoing maintenance to your home. That doesn’t mean you have to fix every wobbly door knob in the building, but you do need to promptly fix anything that could cause a serious problem later on.
Fires, floods and storms
Fires, floods and storms are a serious concern for many Aussie homeowners - being underinsured when a natural disaster happens can mean big cleanup bills. So it’s important to make sure that your home insurance policy not only covers natural disasters, but has an adequate level of cover to pay for your rebuilding and repair costs.
Cover for natural disasters is included in a lot of policies, but if you live in an area prone to disasters, it might be a good idea to look at some additional cover.
If you’re not in a risk area for natural disasters, you’ll still likely pay a premium for it. This might seem unfair and tempt you to go hunting for a less expensive policy that excludes cover for events you’re not at risk for - but before you do, make sure you definitely don’t need the option of being covered! After all, nobody plans for an accident to happen - that’s why they’re called accidents.
Since disaster cover is pretty standard for home insurance policies, what might be useful for you to know is what is not included under the cover.
Generally speaking, you’ll be protected against loss or damage from fire, including bushfires. But you aren’t covered for:
- scorching or heat damage without fire
- cigarette burns
- damage caused by an open fireplace, combustion heater or stove
- repairs to electrical systems (but fire damage from malfunctioning electrics is covered)
There’s also often a waiting period of around 48 hours between when you purchase your policy and when bushfire cover begins, unless:
the policy is a renewal of the policy you previously had to cover the same building
or you have only just bought the property
Your policy will usually include cover for storm damage, except:
- if rain, hail or snow comes into your home because it’s not properly maintained (for example through a crack in the roof)
- damage caused to gates or fences by wind
- damage to outdoor areas or items, like your garden, path, driveway, swimming pool or greenhouse.
Like fire cover, there’s usually a waiting period (often between 48-72 hours) between when you buy your policy and when the storm cover is activated, unless it is a policy renewal on the same building, or you’ve only just bought the property.
Flood cover protects you against water damage from overflowing rivers, lakes or other bodies of water, not including the ocean. But you aren’t covered when damage is done
- to a part of your home that isn’t fully built
- to outdoor areas or fixtures like a path, driveway, garden, or tennis courts
- to a swimming pool or spa, including the cost to clean it out after a flood
As with the other two types of disaster cover, there is often a 48-72 hour waiting period between when you purchase your policy and when cover for flood damage begins.
Home insurance and AirBnB
In 2016, there were more than 70,000 Aussie properties listed on AirBnB. That’s a lot of people renting out spaces - but as AirBnB becomes an increasingly popular way to make money with your home, it’s important to know how it works as far as your home insurance policy goes.
Generally speaking, if you’re hosting an AirBnB stay, you’ll be covered by AirBnB’s Host Protection Insurance. This is a short-term rental policy, and includes liability cover and if you’re lucky, for any damage done to your home.
But that’s not an airtight scheme, and generally speaking, most regular Australian insurance policies won’t cover AirBnB guests, either because they aren’t considered residents of the property, or because AirBnB hosting is considered a ‘business activity’ which is excluded from most home insurance policies.
So what insurance do I need to be an AirBnB host?
Your best bet is probably going to be to take out landlord’s insurance. Many of these policies are designed for long-term rental properties, and may not cover stays any shorter than a few months. But you can find landlord’s policies specifically designed for short term stays, which is exactly what you’re looking for.
This will mean you’re covered for things like accidental damage, theft or malicious damage by a tenant/guest and liability if your guest is injured on your property. It also covers loss of rent - so if your guest runs out the door without paying, or causes damage that means you can’t book in another guest for a while, the loss of income from that should be paid by your insurance.
Can my insurer cancel my policy?
Short answer? Yes, but only in certain circumstances.
Your insurer can cancel your policy with a minimum 3 days notice period (although most will give longer). Keep in mind that if your home insurance is cancelled, next time you apply for a policy your premiums will likely be higher, because you’ll be seen as risky.
The reasons why a policy might be cancelled include:
- You haven’t paid your monthly premium. Usually this is only grounds for cancellation if the payment is outstanding for a month or more.
- You lied or omitted facts when applying for the policy. If you bought the insurance policy on false grounds, your insurer is likely to cancel it if they find out.
- You try to make a fraudulent claim on your insurance. This can also get you into trouble with the law, so it’s not a good idea at all!
- If you haven’t done any of these things, your insurer generally can’t cancel a policy that has been in place for more than 60 days.
Cancellation vs non-renewal
There’s a difference between an insurer cancelling your policy and choosing not to renew. When it comes time to renew your home insurance policy, your insurer needs to inform you in writing 14 days before the policy runs out. Usually, the insurer will take this chance to send you a new contract, which you can agree to if you think it’s a good deal.
But your insurer can also choose not to renew your policy at this point. Unlike cancellation, which can only happen in specific situations, your insurer can basically choose not to renew at its discretion.
The good news is that, also unlike cancellation, non-renewal won’t often result in your premiums being higher with your next insurer.
Can I cancel my home insurance policy?
Yes. If for some reason you decide you want to cancel your home insurance policy, you can usually do so by giving your insurer a call.
You have a couple of options when cancelling. You can:
- Wait until the end of your current term and choose to cancel your cover rather than renew, or
- Cancel before the term is up.
If you choose the latter, remember that you may not be entitled to a refund of your premium after the cooling off period, which is typically around 21 days.
What policy should I choose?
Here’s the thing: your home insurance policy is as unique and personal as your home. That means there’s no one size fits all option, and chances are you’ll want to talk to a professional before picking your policy.
But that doesn’t mean you can’t do your research, compare your options and know what you’re getting into. Here are some of the main things to keep in mind when choosing your policy:
- The price. Let’s face it - price is probably going to be a serious consideration when choosing your home insurance policy. But the option with the cheapest premium isn’t always the best choice, because the excess could be very large, or you might wind up being underinsured. If something goes wrong and you have to make a claim, the cheapest home insurance policy on the market might not cover you for much at all.
Instead of simply opting for the cheapest deal around, compare your options and consider what you’ll need to get out of your policy. For example, if you live in a flood zone, paying a higher premium for extra flood cover could be a wise investment.
- Getting the right type of policy. We’ve covered the types of home insurance above, and it’s important you choose the right one for your property. If you’re a landlord, you need a policy tailored to your needs, just like renters need a specific kind of cover, and so do owner occupiers.
- Total replacement vs sum-insured. Choosing the right policy also means choosing what kind of cover you’ll have. Generally, you have two options - total replacement cover, which will cover the entire cost (less excess) of replacing or repairing your home or belongings with new ones, or sum-insured cover, which covers your home and belongings for their current value, taking into account depreciation.
Opt for total replacement cover and you’ll usually pay higher premiums. Sum-insured cover, which is more common, will likely mean your insurance payout is a little less, but your premiums will be lower.
- Additional cover. There are a number of reasons why you might want to think about choosing a home insurance policy that has the option of additional cover. Maybe you live in a flood, earthquake, or bushfire prone area and want extra cover for natural disasters. Or maybe you keep a lot of expensive sports equipment, jewellery or tech gear in your home and want it insured above the limits of regular cover.
If this is something that applies to you, it’s worth thinking about buying extra coverage for these things, so you aren’t left out of pocket in an emergency.
How to apply for home and contents insurance
Applying for a home insurance policy is easy - you can usually do it online, over the phone or in a branch if you’d rather talk to a flesh and blood person. The insurer will run you through the process, but here are some of the basics to get you started.
You’ll want to shop around when you choose a home insurance policy - it might save you hundreds, or even thousands of dollars. Which means the place to start, is by checking out the deals available at the moment, and getting some quotes that are tailored to your needs.
How do I get a home insurance quote?
The easiest way is to either jump on the insurer's website directly or use an online comparison tool, which compares multiple insurers at once.
What details will I need?
When you apply for a home insurance quote, you’ll need to have:
- Your personal details, including name, age, and contact details
- Details about the property you want to insure. This includes basic things like the address, but also details like what your home is made of, how old it is and who lives there.
- Your insurance history. If this is your first time buying home insurance, this should be pretty easy, but if you’ve got a history of changing insurers, make sure it’s well-documented.
Also, be ready to field questions about your “risk level”. This could include things like whether you’re in an area prone to flooding or vandalism.
What should I specify?
You'll also need to have some idea of what kind of policy you’re after by the time you apply. This is because you’ll have to specify a few things on your application, and even when you get a policy quote. Here are some of them:
- What cover you want (home and contents, contents only, renters or landlords insurance)
- The level of cover (sum insured or total replacement)
- Your desired excess
- Any extra events you’d like covered (such as extra cover for natural disasters)
- Any items you’d like extra cover for (higher limits of cover for valuables like jewellery, sports equipment of antiques.)
Tips to save on your home insurance
Now for the really important part: how to not pay way too much for a home insurance policy. Because, yes, home insurance is important and necessary. But that doesn’t mean you should pay through the nose for it.
Here are our top tips for snagging a good home insurance deal:
- Go digital. It’s no secret that online providers can save you heaps on a whole range of banking products, and home insurance is no different.
- Do you need life insurance or car insurance? If you buy multiple policies with one provider, you might be able to cash in on a multiple policy discount. Head over to Mozo’s insurance hub to see what’s available.
- Have you recently installed a new security system? Making improvements to the security of your home can lower the risk of making a claim, which will mean you might be able to snag a lower premium!
- Think twice before you claim. A claim against your home insurance, big or small, will mean that your next premium will likely rise by 10% or more. So think about your excess, how much the payout would be and whether it's worth making a claim at all.
- Review and reevaluate your policy. When the time comes to renew your home insurance policy, don’t just let your insurance rollover. Instead, shop around, compare the home insurance policies on offer and find the one that will give you the cover you need for a price you’ll love.
Traps to avoid
So you know all the tips to save on your home insurance, but what about the pitfalls that homeowners fall into? Well, don’t worry, we’ve listed them here, so you can remember and avoid these common mistakes:
- Supplementary costs, which includes all those extra costs that might arise from an accident - like staying in a hotel room while your flooded house is repaired - may not be covered in your policy. Each insurer has a different approach - some may include supplementary costs, others won’t and some might only cover them in certain circumstances. So make sure you check, and know exactly what you’re covered for.
- Many insurers don’t cover buildings that have been unoccupied for an extended period. So if you’re going away for a long time, let your insurance company know. It’s sometimes possible to have your home covered anyway under an unoccupied excess.
- Any damage that occurs to your home because you haven’t maintained it, for example, if your house floods because you haven’t resealed damaged doors and windows, won’t be covered. So make sure you’re doing regular maintenance on your property.
- Claims for removable items left in your yard - that fancy new, chrome plated barbeque - may not be covered under a regular policy. So check your backyard and make sure everything important is listed on your policy.
- Letting your insurance roll over without reviewing. If you’re letting your home insurance policy renew automatically year after year, you could be missing out on some great savings. Each time your policy comes to an end, it’s well worth comparing home insurance offers to make sure yours is still the most competitive.
- Doing renovations? Some policies don’t cover things like injuries or theft while construction is going on in your home, so it’s important to check if your policy covers renovation work before you start work.
- Under-insuring. The number one trap that frugal homeowners fall into! If you’ve insured your home for less than it will cost you to rebuild, then your insurer can apply ‘averaging’ to any claim you make.
What is averaging? Say the value of your property is $600,000 - so it would cost $600,000 to completely rebuild it. If you’ve insured it for $480,000, or 80% of its full value, then your insurer can ‘average’ any claim you make to 80%. Check out this example:
How to make a home and contents insurance claim
If something unfortunate happens and you do have to make a claim on your home insurance, there are a few steps you should follow:
- Minimise the damage. If it’s safe to, try to minimise the damage to your property or belongings. This might mean moving your things out of a flooded house, or blocking off an unsafe area of your house.
- Get a police report. If the claim is something that requires a police report (say, a break in) then make sure you organise the report ASAP and get a copy of it.
- Call your insurer. Let them know what happened, and check what you’ll need for a successful claim, in case there are specific documents you need to keep (for example, the police report or receipts from hotel stays).
- Gather evidence. No, you don’t have to turn into an overnight forensic scientist. But it is a good idea to take photos, or make lists of damaged or stolen items before you start cleaning up. Don’t throw anything away either - you made need it for the next step.
- Establish value. You’ll have to work out what the value of stolen items or the cost of damage to your property is worth. Sometimes, your insurer will require this to be done by a professional, and sometimes they’ll ask for proof of value, such as receipts.
These days, you can usually lodge your home insurance claim online or over the phone, but some insurers might still require you to download and fill out a claims form. There are some things you’ll need to have on you when making a claim. Follow this handy checklist to make sure you’re ready to go.
Do you have:
- Your insurance policy number
- Your contact details
- Contact details of anyone else involved in the claim, e.g. if it is a liability claim because your neighbour injured themselves on your property, get their details too.
- Any relevant documents, such as police reports