What is home insurance and what does it cover?

Published September 2024 | 6 min read  
Expert contributor Nicole Pedersen-McKinnon, author and financial expert  
Words by Lucy E Cousins 

Whether you own your own house or rent, taking out home insurance is one way to bring you peace of mind. 

In the hustle and bustle of modern-day post-COVID life, our homes have become increasingly important retreats. Not only are they places of relaxation and entertainment, but now 74% of Aussies also say their ideal work environment is one that allows some flexibility in working from home, with 16% wanting to work from home 100% of the time.  
 
We’re also a houseproud nation, even if we're renting. In fact, a recent survey found that millennials today are more houseproud than any other generation. When you consider that rent and mortgage costs are the largest expense by far for most Australian families, it’s not surprising that as a nation we tend to invest in their upkeep and decor.  
 
That’s why, says Nicole Perdersen-McKinnon, financial expert and author of the book How to Get Mortgage Free Like Me, it’s vital to protect our homes as well as everything in them.  
 
“Your house is your most valuable asset,” she says. “It's like if you can't afford travel insurance, you can't afford to go on holiday. Your house insurance is a non-negotiable cost of owning that house.”  

What is home insurance and what does it cover you for?

Home insurance is a type of property insurance that covers you financially if something happens to your home or contents. The insurer agrees to pay to rebuild or repair your house, or replace or repair your contents, if they're destroyed or damaged. Most insurers will have a list of events that it covers, and it may include some or all of the following:

• fire or smoke (including bushfires^* and grassfires^*)
• theft or burglary
• storm, cyclone^* or rainwater
• flood^* and/or run-off^*
• lightning
• water or other liquid damage
• impact damage
• earthquake or tsunami
• accidental breakage of glass or ceramic items
• vandalism or malicious damage
• explosions
• riots or civil commotion.

Some of the things home insurance won’t cover generally include damage due to general wear and tear, lack of maintenance, existing damage and sports equipment while in use.

What are the different kinds of home insurance?

There are four key types of home insurance, each offering a different scope of coverage.

Home insurance

Home insurance, also known as building insurance, covers damage to your home from insured events, as well as structures like garages, driveways, gates, fences, solar panels and inground pools. The amount you’re insured for should cover replacing your property. Home insurance doesn’t cover the contents or your possessions inside your home; however, some insurers offer additional benefits such as replacement locks (if your keys are stolen), legal liability (if you’ve accidentally injured someone or damaged their property), and debris removal if your home is damaged by an insured event.

Contents insurance

Contents insurance covers damage or loss of the possessions in your home by certain insured events. This insurance covers things like furniture, tech devices, sports gear, tools, clothes, electrical goods, jewellery and even curtains and blinds. Contents Insurance doesn't cover any damage or loss to the home itself or to any fixed structures. If you live in a strata title development, some fixtures and fittings which aren't insurable by the body corporate may be covered under Contents insurance. Be sure to check with your insurer. If you're renting, you only need contents insurance – some insurers even offer specific cover for renters.

Home and contents insurance

A home and contents insurance policy covers loss or damage to the contents of the home you live in as well as to the property itself and any fixed structures. Some insurers offer a discount for combined or ‘bundled’ policies like this.

Landlord insurance

This is an insurance policy designed specifically for property owners who are renting out their property. With this kind of policy, you may also be able to claim the loss of rent if the property becomes unliveable because of this damage by an insured event, as well as malicious damage caused by tenants.

How much home insurance do you need?

When it comes to working out how much cover you need, Nicole says it pays to do your research and look around. She says jumping at the cheapest option can lead to being underinsured, where you don’t have enough cover to rebuild or replace your home and contents.

In a recent survey, 83% of households in Australia believe they may be underinsured when it comes to their home and possessions.

“It is a completely false economy to buy a product that's cheap and cheerful that will not be there for you when you really need it,” she says.

To make sure you're adequately covered, you'll need to consider your sum insured. The sum insured is the amount you have nominated to cover the cost to rebuild or repair your home or replace or repair your contents in the event they're damaged or destroyed. These estimated amounts are what's covered, and you're responsible for providing those dollar figures. To do this, most insurers offer home and contents insurance calculators, or there are free calculators recommended by the Insurance Council of Australia.

Optional extras on home insurance

In addition to your home insurance policies, you may also have the option of adding on some extras. This is a good way to personalise your insurance to your circumstances. Some of these optional extras can include, but aren’t limited to, the following.

• Accidental damage helps insure you in the event of unexpected mishaps - giving you greater coverage for your building or contents.
• Motor burnout helps in the event an electrical current causes damage to your household electrical motors. This is sometimes offered as an optional benefit or as part of standard cover. Check with your insurer or PDS. 
• Portable contents covers certain ‘portable’ items (for example, purse, jewellery, glasses, mobiles, cameras) while outside the home. This cover can offer cover Australia-wide, and some insurers even offer this option outside of Australia when you're travelling for certain periods of time.

Cover your home, inside and out

We understand the importance of safeguarding your home and belongings against the unexpected. Which is why we’re now offering HCF Home and Contents Insurance and HCF Landlord Insurance. Get a quote now^{^}.