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How to choose the right home insurance

Choosing the right home and contents insurance policy is often difficult and time-consuming. A comparison service aims to make that process easier and faster, giving people peace of mind that they have made the right decision. It does this by helping compare policies and shop around for a better deal.

There are two types of home building insurance: total replacement cover and sum-insured cover.

Total replacement cover:

This insurance will cover the cost to rebuild your home to the standard it was before an event.

Pros – Reduces the chance of any shortfalls between what it costs to repair or rebuild your home and the amount you are insured for (also known as ‘underinsurance’).

Cons – Only a few insurers offer total replacement policies. It might also take some time to receive the funds under this policy if you suffer a total loss, as the insurer will need to conduct a full assessment to work out the cost of rebuilding your home. This could also be delayed if access to your property or the local area is restricted due to a natural disaster.

Sum-insured cover

This insurance is more common and will cover you up to a set amount (‘the sum insured’), selected by you, to repair or rebuild your home.

Pros – If you suffer a total loss, your claim can typically be settled once the insurer has confirmed your loss.

Cons – There is a higher risk of underinsurance, where the actual rebuilding costs exceed the estimated costs. Some sum-insured policies offer an ‘extended cover’ policy that provides up to 30% on top of the sum insured in the event of a total loss, but make sure you read and understand the conditions that apply to this type of policy.

Building insurance policies differ between insurers and even between home insurance ‘brands’ offered by the same insurer.

Compare the features and prices of at least three policies before you choose one. This will ensure you shop around for the right level of cover at the best price. It’s as simple as phoning a few insurance companies, or visiting a few websites.

Find out what you would be covered for with each policy and what you are not covered for (exclusions) including any caps or limits. Also, check if the policy offers any additional benefits.

You can get information about policies from the product’s key facts sheet, which will be on the insurer’s website, or you can ask them to send you a copy. The facts sheet summarises important information about the policy including what you are and aren’t covered for.

If you want more detail than what’s in the key facts sheet, read the PDS, which you can also get from the insurer.

How much is home and contents insurance on average?

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The cost of your home insurance policy, aka your premium, depends on a variety of factors beyond the amount of cover you want, such as your claims history and where you live.

Premiums for home & contents insurance – like other forms of insurance – reflect the levels of risk the insurer will take on for insuring that property. In recent years there has been a slight increase in the severity and frequency of natural disasters, as well as smaller weather events like powerful storms. This has caused a higher number of claims being made, leading to a slight increase in the cost of insurance policies in most of the states and regions.