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How does home insurance work?

Home insurance is a contract between you and your insurer. You pay regular premiums, and in return, the provider offers financial protection for your home and belongings against a range of covered events, like theft, fire or storms.

Here are the key points to help you understand how home insurance operates.

In Australia, home insurance typically falls into three main types, each offering different levels of protection for your home and belongings. The cover you choose dictates what risks are covered—such as damage to your home, your possessions, or a combination of both.

• Home building insurance. This covers the physical structure of your home, including permanent fixtures like walls, roof and floors, in case of events like fire, storms or vandalism. It usually also includes liability cover that protects you if someone injures themselves in your home.

• Home contents insurance. This protects your belongings inside the home, such as furniture, electronics and personal items. Renters have a version of this, typically called renter’s insurance, but any content insurance will usually do.

• Combined home and contents insurance. The most comprehensive option, this bundles both building and contents cover.

• Landlord insurance. Covers landlords for building and/or contents, and usually includes protection for unique landlord risks like loss of rental income and tenant-related damage.

Since landlord insurance is a specialised type of cover that doesn’t apply to most renters or homeowners, we won’t dive into it here, but you can check out our landlord insurance guide for more details.

Valuing your home: making sure you have enough home insurance

There are two main ways to value your home and contents for insurance:

• Total replacement cover. This option covers the full cost to rebuild your home, no matter how much it ends up costing. It offers peace of mind but is usually more expensive.

• Sum insured. This is the amount you choose to insure your home for. It can be a bit riskier if you don’t update the figure regularly or if there’s a sudden increase in building costs.

Whichever option you choose, just make sure your home and contents are insured for what they’re really worth to avoid underinsurance—so you’re not left out of pocket at claim time.

What home insurance covers

Here’s a quick look at what home insurance typically covers and what it doesn’t. Keep in mind, every policy is different, so it’s important to check your Product Disclosure Statement (PDS) to understand the specifics.

The home insurance excess

When your insurance provider approves a claim under your policy, you’re generally responsible for paying a portion of the costs. This portion is known as the excess. Here are some important points to keep in mind about excesses.

• The excess amount. Many home insurance policies allow you to choose your excess. A higher excess can lower your premiums because you’ll pay more upfront if you make a claim, while a lower excess generally means higher premiums. Common excess amounts range from $500 to $2,000, but some policies offer options as low as $0 or as high as $5,000.

• Additional excesses. Besides the standard excess, additional excesses may apply in specific situations, such as during renovations, if the property is left unoccupied for an extended period, or for certain events like earthquakes. Be sure to review your policy to understand how these might affect your overall costs.

LEARN MORE ABOUT EXCESS

The home insurance premium

Your home insurance premium is the amount you pay for your policy, typically either monthly or yearly, with some insurers offering a discount if you pay annually. The cost is influenced by various factors, including your level of cover, the excess you choose and a range of factors, some in your control and some not so much. 

Factors affecting your price can include:

How to compare home insurance quotes

Comparing home insurance quotes is easier than ever these days. In just a few minutes, you can sort through the options, weigh up the features, and find a policy that suits your needs.

Here’s a simple way to go about it:

• Create your shortlist. Start by checking out the policies we’ve listed above. Look at the features that matter most to you and narrow down your top picks.

• Get quotes. Fill out the insurer’s online form with your home’s details, like its location and the type of cover you want.

• Read the PDS. Once you’ve found a couple of quotes you like, take a quick look at the product disclosure statement (PDS) to make sure you’re across all the details of the policy.

If everything looks good, you can usually lock in your policy online. If the insurer needs more information, they’ll reach out for more details.

The home insurance PDS

PDS stands for Product Disclosure Statement, and it lays out all the fine details of your contract with the insurer.

It tells you exactly what’s covered, what’s not, how much coverage you have, and the specific situations when you can make a claim—plus anything that might void your cover. Think of it as the go-to document for understanding your policy.

Because of financial regulations, you can find the PDS for any home insurance policy on the insurer’s website, whether you’re a customer or not.

LEARN MORE ABOUT A HOME INSURANCE PDS

Dealing with damage, theft or liability incidents

This is the incident phase—because in home insurance, it's not just about damage, but can also include incidents like theft and even liability if someone is injured on your property.

How you respond immediately after an incident is key to the investigations, assessments and resolutions that follow.

That’s where documentation is important. It helps you support your claims and provides your insurer with the information they need to handle things smoothly, especially if there’s any question about the circumstances.

• Documenting home damage. If your home suffers damage from a storm, fire, vandalism or another covered event, be sure to document everything. Take clear photos of the damage, note down the details (such as time and cause), and keep any receipts for emergency repairs or temporary fixes. If the damage is from vandalism, contact the police to file a report before contacting your insurer.

• Documenting theft. If a break-in occurs, the first step is to contact the police and file a report. Then, document any stolen or damaged items by taking pictures and gathering receipts or records. Contact your insurer to inform them and follow their instructions.

• Documenting liability incidents. If someone gets injured on your property and you need to make a liability claim, gather as much evidence as possible. Take photos of the scene, get witness statements, and keep any medical or police reports that may be relevant.

Your policy may have specific conditions for smaller incidents (like a broken window or damaged fence). Your PDS will outline how to handle these situations, but when in doubt, reach out to your insurer for guidance.

Making a home insurance claim

When you make a claim, you're asking your insurer to step up and cover the costs of an event your policy protects you against. The process usually involves letting your insurer know what happened, filling out their claim form and providing any supporting documents like photos or receipts.

Most insurers give you a few options for submitting your claim—online, by email or over the phone. That said, if it’s a big event, it’s a good idea to call them first so they can walk you through what to do and make sure you’re on the right track.

LEARN HOW TO MAKE A HOME INSURANCE CLAIM

Settling a home insurance claim

Once your insurer has reviewed the details of your claim, they will either approve or deny it, and pay out any damages according to your policy. This happens after they’ve investigated the incident, reviewed the evidence, consulted third parties (such as police or contractors), and assessed the damages.

If your claim is denied or you disagree with their decision, you have two options for appeal:

• Internal appeals process. Your insurer will have an internal disputes resolution team that is separate from the department that handled your claim. The first step is to lodge an appeal with them, following the process outlined in your PDS.

• Australian Financial Complaints Authority (AFCA). If you're not satisfied with the result of the internal appeal, you can take your case to the AFCA. They offer a free and independent service to help resolve disputes. Just make sure you have all your evidence and documents ready when you approach them.