This fact sheet is one of a series that looks at the steps you can take to give yourself the best chance of fixing or replacing your property and belongings if they're damaged or destroyed in a natural disaster, such as a bushfire, flood or storm.
See Fact Sheet 18: Glossary for definitions of words and terms that are in bold text.
To find other fact sheets in the series go to www.InsuranceCheckup.tas.gov.au or visit your local Service Tasmania for an info pack.
Home insurance
What is home insurance?
Home insurance covers the cost of repairing or rebuilding your house, flat or apartment. If you have a home loan, you are usually required to have this type of insurance. All the details of the agreement between you and your insurer are set out in your home insurance policy.
What does home insurance cover?
Most home insurance policies cover the main building, your garage and any other outbuildings that can be locked up, as well as items that are permanently attached to your home, such as light fixtures, built-in wardrobes and carpet. Window coverings (curtains or blinds) are more often covered by contents insurance. If you are not sure exactly what is covered, check the Product Disclosure Statement for the policy.
Some policies are very specific about the kind of building that won't be covered, e.g. you may not be covered if you operate a business from a building separate to your residence, or if you use any part of a site for hobby farming, including stables, machinery, hay sheds or boundary fences.
You may also be responsible for insuring any fences, bridges or power poles on your property. In these cases, you may need to take out a different type of insurance policy (see Fact Sheet 8: When you might be responsible for roads, bridges, fences and power poles).
What are the different types of home insurance cover?
1. Sum-insured cover
- Most common cover offered by insurers.
- Covers you up to a set amount, chosen by you, to repair or rebuild your home.
- Some policies have a safety net that can give up to 30% additional cover on top of your sum insured if your home is declared a total loss, but it's important to make sure you understand any conditions that apply to this.
- The premium for sum-insured cover is generally less than you would have to pay for total replacement cover.
2. Total replacement cover
- Only a few insurers offer this cover.
- Covers the cost of rebuilding your home to the standard it was before the event that caused the damage.
- You don't set a cover limit, so the insurer pays the total cost of rebuilding your home.
- This cover is your best protection against underinsurance.
- The premium is generally higher than you would have to pay for sum-insured cover.
- It can take some time to receive a payout because the insurer will need to do a full assessment to work out costs of rebuilding, and this assessment might be delayed if access to your home is restricted after a natural disaster.
To help you work out the value of your home and how much it would cost to replace it, most insurers have a calculator on their website, or you can use the Insurance Council of Australia's building calculator on the Resources page of their website at www.understandinsurance.com.au (see Fact Sheet 4: What it would cost you to replace everything you own).
People who own or are buying their home usually combine their insurance into a single home and contents policy. This can reduce the premium for the policy.
Contents insurance
What is contents insurance and what does it cover?
Contents insurance covers you for loss or damage to the personal possessions you have in your home, e.g. furniture, electronic devices, curtains and blinds, sports equipment, tools, clothes, electrical goods, and jewellery. A contents policy usually only covers items owned by you, anyone else named in the policy and members of your family living with you.
What are the different types of contents insurance cover?
1. New-for-old cover
- Most common cover offered by insurers.
- Covers you up to a set amount (sum insured) for the full cost of replacing lost or damaged belongings with new 'equivalent' items that are most similar to the items being replaced.
- Example: If your computer is fairly old and is destroyed in an insurable event, your policy won't cover the cost of replacing it with a new model that offers the latest and best features available. Instead, you'll be able to replace it with a new computer that is as good as the one you lost.
- You will generally pay a higher premium for new-for-old cover than you would for replacement-value cover.
2. Replacement-value cover
- Covers belongings for their current market value (the amount you would receive if you were to sell them). Because the value of most items lessens (depreciates) over time, it's easy to be underinsured with this type of cover.
- Example: While your computer might have been worth $2,000 when you bought it a few years ago, if it is destroyed today, the money you receive from your insurer will reflect its current value, which will most likely be a lot less than its original purchase price.
- You will generally pay a lower premium for this type of cover, but you need to decide whether this is worth the risk of underinsurance.
To help you work out the value of your contents and how much they would cost to replace, most insurers have a calculator on their website, or you can use the Insurance Council of Australia's contents insurance calculator on the Resources page of their website at www.understandinsurance.com.au (see Fact Sheet 4: What it would cost you to replace everything you own).
Large-value items
If you have any large-value items (such as expensive jewellery, cameras, smartphones or musical instruments), you can specifically add these to your insurance cover or insure them separately. This is usually called portable contents insurance, personal effects cover or personal valuables cover. It is designed to cover high-value items and items you regularly take with you when you leave your house. These items may not be covered under ordinary contents insurance, so make sure you tell your insurer if you want to include them on your policy.
This type of insurance might also be a good option if it is not cost-effective for you to take out a policy for all of your belongings.
If you are a renter or tenant
If you are a renter or tenant, it's important to know that your belongings are not covered by your landlord's insurance policies. This means you are responsible for buying your own contents insurance (see Fact Sheet 9: Renters insurance).
Resources
For general information, and for calculators and other tools to help you manage your own insurance:
- Understand Insurance: www.understandinsurance.com.au
- Find an Insurer: www.findaninsurer.com.au
- Money Smart: www.moneysmart.gov.au
Important notice
This fact sheet gives you basic and general information only. It does not cover every situation or everything you may need to know about insurance. It does not take into account your personal circumstances. Make sure you carefully read Key Facts Sheets and Product Disclosure Statements. Ask your insurer as many questions as you need in order to understand how your insurance policy will work for you. Use other tools available to you and seek professional advice if needed.
Information in these fact sheets has been drawn from a number of publicly available Government and non-Government resources.
This project has been jointly funded by the Commonwealth and Tasmanian Governments under the Disaster Recovery Funding Arrangements.