How much does home and contents insurance cost?

There are several factors insurers consider when calculating premiums. Along with your sum insured and chosen policy excess, the cost of your home and contents insurance may vary depending on the following factors:

• Type of cover. Buying a combined home and contents insurance policy will typically cost more than contents only cover or a standalone home insurance policy (also known as ‘building insurance’ or ‘home building insurance’).
• Your level of cover. Your home insurance premiums will be affected by the level of cover you choose. A policy that includes more benefits and covers a broader range of events will cost more.
• Any optional extras you add. Insurers will often have extra cover available that you can choose to add to your policies, usually for an additional cost. This could include insurance for portable items (like mobile phones and laptops) and accidental damage. Landlords insurance for home buildings may also offer optional cover for malicious damage by tenants.
• Your suburb’s crime rate. If there’s a lot of crime in your neighbourhood, like break-ins and burglaries, your insurer may charge a higher premium.
• Natural hazard risk. Your suburb’s risk of natural disasters (such as floods, storms or bushfires) influences the cost of insurance. The higher the risk perceived by your insurance company, the higher your premium may be.
• Home security. If you reduce your risk of theft in and around the home (e.g. installing alarm systems, adding deadbolts on doors and windows), this could reduce your home and contents insurance premium.
• Age and structure of your property. Your insurer will consider your property’s age, construction materials and sturdiness to determine how likely it is to withstand severe damage and how much it might cost to replace.
• How the home is used. Your premiums may be calculated differently depending on how you use your home, such as if you conduct business from your property or rent it out.
• Any government charges. Your premium may be impacted by government taxes and state- or territory-based stamp duties or levies (e.g. Emergency Services Levy).

When you buy home and contents insurance in Australia, your insurer is required by law to supply a key facts sheet, which outlines the events your policy does and doesn’t cover. Along with this document, you should thoroughly read through the relevant Product Disclosure Statement (PDS), which lists the policy’s terms, conditions, inclusions and exclusions. The Target Market Determination (TMD) could also help you understand whether the policy is suitable for you.

• Choose a higher policy excess. This could reduce your premiums, but keep in mind that if you do claim, you will have a higher excess to pay. Before increasing your excess, consider if it’s an amount you could afford if you need to claim.
• List your security measures. Adding security features to your home can lower your premium, so it’s a good idea to notify your insurance provider if you have these security features installed.
• Seek out online discounts. Most insurance providers apply discounts to the first year of your policy if you buy online. You could also get those discounts when you compare and buy through Compare the Market.

The sum insured on your home insurance policy is the maximum amount you may receive after lodging an accepted insurance claim if your home and/or contents are destroyed. Your sum insured should be sufficient to cover full replacement and rebuilding costs for your home, along with the replacement costs of your possessions. Otherwise, you could risk being underinsured, which can leave you out of pocket.

While the estimated value of your home can be a useful starting point for the sum insured on your home insurance policy, there are some other things to consider:

• Your building sum insured amount doesn’t need to include your land value, just the cost to rebuild your home.
• When you insure your home, you’ll need to calculate the replacement value of the residential structure and associated outbuildings (like garages) as accurately as possible.

You’ll also need to make sure your contents insurance covers your belongings in your home. It’s also worth considering portable contents cover so the replacement costs of items you take outside your home are also included.

Excess refers to the sum your insurer may ask you to pay when you claim on your policy.

Insurance policies usually have a basic or standard excess, which applies to most claims. If you have combined home and contents insurance, your policy may have separate excesses for home claims and contents claims.

While a basic excess will typically apply when you make a claim, you may also have other applicable excesses to pay. For example, if you’re claiming for an insured event like an earthquake, you may have to pay the basic excess as well as the excess for that specific event.

Your Certificate of Insurance (COI) and the relevant PDS will list the full details of your excess payments and other policy information.

If you get a home loan to buy your house, many lenders require you to get a certain level of home and contents insurance before they approve the loan. During the buying process, your lender will perform their own valuation and give you a minimum amount to insure your home for.

Generally, you can only claim your home and contents insurance on tax if you’re a sole trader or business owner conducting your business from home.

However, you may potentially be able to claim a portion of your home insurance premiums on tax if you:

• Carry out work duties at home and not just simple tasks like taking calls or reading emails
• Keep a record of the additional expenses you incur by working from home.

Consider consulting a tax agent or financial advisor about what you can and can’t claim at tax time.