Home and Contents Insurance: How Much Cover Do You Really Need?
Underinsurance is the most common home insurance problem in Australia. Here is how to set your building and contents sums insured correctly.
Key takeaways
- Insure your home for its rebuild cost, not its market value or purchase price.
- Contents should be valued on a new-for-old basis, room by room.
- High-value items such as jewellery and bikes often need to be listed separately.
- Review your sums insured after renovations, major purchases or big changes in building costs.
Most home insurance disputes after a major loss are not about whether the policy covers the event. They are about whether the sum insured was enough. Rising construction costs, demolition and debris removal, and the cost of meeting current building codes all push the real cost of rebuilding well above what many owners expect.
Building cover: rebuild cost, not market value
Your home's market value includes the land, which does not burn down. Your building sum insured should reflect the cost to demolish, clear and rebuild the house to current standards, including fences, driveways, sheds, pools and professional fees. Most insurers provide online calculators, and for unusual or high-value homes a professional valuation is worth the cost.
Contents cover: a room-by-room exercise
Walk through each room and estimate what it would cost to replace everything new today. People consistently underestimate clothing, kitchen equipment, tools and the contents of garages. Check whether the policy is new-for-old, and note the standard limits for categories such as jewellery, artwork, bicycles and collectables. Items above those limits need to be specified.
The checklist before you buy
- Assess your personal needs and the risks in your area
- Understand inclusions, exclusions and excesses
- Estimate rebuilding costs accurately, including demolition and fees
- Value contents on a new-for-old basis
- Understand sum-insured versus total replacement cover
- Check maximum claim limits for high-value categories
- Confirm storm, flood and bushfire cover if you live in a high-risk area
- Review the sum insured every year
What is commonly excluded
Buildings under construction, cash and negotiable documents, movable structures such as caravans, and wear and tear are common exclusions. Flood definitions and bushfire embargo periods also vary between insurers, which is where a broker's comparison earns its keep.
Get the numbers right
Kasana Insurance Brokers helps you set sums insured that reflect reality, compares policies from trusted insurers and supports you through any claim. A short review now is far cheaper than discovering a shortfall after a fire or storm.
Frequently asked questions
What is the difference between sum insured and total replacement cover?
Sum insured cover pays up to a fixed amount you nominate. Total replacement cover pays whatever it costs to rebuild your home to the same standard, which removes the risk of underinsurance but is offered by fewer insurers.
Does contents insurance cover items outside the home?
Many policies offer optional portable contents cover for items you take outside the home, such as phones, laptops and jewellery. Check whether it is included or needs to be added.
Is a home under renovation covered?
Buildings under construction or major renovation are often excluded or need to be declared to the insurer. Tell your broker before work starts.
Related cover
This article provides general information only and does not take into account your objectives, financial situation or needs. Consider the relevant Product Disclosure Statement and speak with a broker before acquiring any insurance product.
