What is home insurance?

Home insurance, often called building insurance or home and contents insurance, is the policy that covers damage to the structure of a residential property. It pays to repair or rebuild the home after fire, storm, flood (where covered), earthquake, vandalism, theft, accidental damage, and other listed events. Home insurance is compulsory for properties with a mortgage because lenders require it, and is strongly advisable for any owner-occupier.

Two main pricing structures are used. Sum-insured policies pay a maximum of the figure nominated by the homeowner, which should reflect the cost of rebuilding the home (not its market value or land value). Total replacement policies pay whatever it costs to rebuild to the same standard, regardless of the original sum insured. Total replacement is less common but provides better protection in a rising construction market or after major weather events when local building costs spike.

Australian home insurance is regulated by the Insurance Contracts Act 1984 and the Australian Securities and Investments Commission (ASIC). Insurers must provide a Product Disclosure Statement (PDS) that explains what is covered and what is excluded, the premium, the excess, and any conditions. Common exclusions include damage from inadequate maintenance, gradual wear and tear, pests, deliberate acts by the owner, and war or nuclear events. Flood cover is now standard following 2008 reforms, but specific exclusions can apply in high-risk locations.

Premiums vary widely depending on location, construction type, security features, claim history, and chosen excess. Northern Australian homes face higher premiums because of cyclone risk, addressed in part through the federal Cyclone Reinsurance Pool established in 2022 to moderate premiums in the high-risk region. After a covered event, the homeowner lodges a claim with the insurer and pays the excess, then the insurer arranges or reimburses the cost of repairs. Disputes about claims can be taken to the insurer's internal complaints process and, if unresolved, to the Australian Financial Complaints Authority (AFCA).