Home and contents insurance protects your dwelling and belongings, but not everything is covered automatically. Standard home (building) insurance typically covers the structure against fire, storm damage, and malicious damage, while contents insurance covers your possessions inside. Common exclusions include gradual wear and tear, poor maintenance, deliberate damage, and in many policies flood damage unless specifically added. Getting your sum insured right is critical: underinsurance means you may only receive a proportion of your claim, even for partial losses.

What Home Insurance Covers in Australia

Home insurance (also called building insurance) protects the physical structure of your dwelling. According to ASIC MoneySmart, this typically includes the house itself, permanently attached fixtures such as kitchen cupboards and bathroom fittings, fixed floor coverings, and structures like garages, sheds, and fences (MoneySmart, 2026).

Standard policies generally cover damage from fire, lightning, explosion, storm, water damage from burst pipes, impact from vehicles or aircraft, theft, vandalism, and malicious damage. Some policies extend to temporary accommodation costs if your home becomes uninhabitable due to an insured event.

Your home insurance sum insured should reflect the full cost to rebuild your home at today’s rates, not its market value. Market value includes the land, which you do not need to insure, but understates the true rebuild cost in many cases. The Insurance Council of Australia warns that many homeowners are underinsured because they base their cover on purchase price rather than rebuild cost (Insurance Council of Australia, 2026).

What Contents Insurance Covers

Contents insurance covers your personal belongings inside the home: furniture, clothing, electronics, appliances, jewellery, sporting equipment, and household goods. Most policies also extend limited cover to contents temporarily away from home, such as items in your car or taken on holiday, subject to sub-limits detailed in the Product Disclosure Statement (PDS).

The sum insured for contents should represent the total replacement cost of everything you own. Walk through each room and estimate the cost to replace every item at today’s prices. High-value items like jewellery, artwork, or collectibles often have individual limits (commonly A$2,000 to A$5,000 per item) unless you arrange specified item cover.

Combined home and contents policies bundle both types of cover, often at a lower premium than purchasing them separately, and simplify the claims process when a single event damages both the building and your belongings.

Common Exclusions: What Is Not Covered

Even comprehensive policies exclude certain events and circumstances. Understanding these gaps is critical to avoid surprises at claim time. As covered in foundational texts such as Introduction to Business, insurance operates on the principle of insurable risk, meaning certain predictable or preventable losses fall outside standard cover.

Standard exclusions include:

  • Wear and tear: Gradual deterioration, rust, corrosion, insects, vermin, or damage from poor maintenance.
  • Deliberate damage: Damage you cause intentionally or that arises from illegal activity.
  • Acts of war or nuclear events: Typically excluded under all policies.
  • Flood: Many policies exclude flood damage unless you specifically add flood cover. The definition of flood matters: water entering from outside and overflowing watercourses is flood, while storm water entering via the roof may be covered under storm damage. Read the PDS carefully.
  • Earth movement: Landslide, subsidence, erosion, and earthquake are commonly excluded or subject to specific sub-limits.
  • Unoccupied homes: If your home is vacant for more than a specified period (often 60 to 90 days), cover may be restricted or void.
  • Mechanical or electrical breakdown: Failure of appliances due to age or fault, not sudden external damage.

Read also: How Many Australians Worry About Home Insurance Costs in Australia?

Before relying on a policy, always read the PDS and the Target Market Determination (TMD) to confirm what is and is not covered, and whether optional extras like flood cover, accidental damage cover, or home emergency cover suit your needs.

Why Getting Your Sum Insured Right Matters

Underinsurance is the most common mistake Australian homeowners make. If your sum insured is less than the true rebuild or replacement cost, insurers apply a co-insurance or average clause: you receive only a proportion of the claim, even for partial losses.

For example, if your home would cost A$500,000 to rebuild but you insure it for A$400,000 (80 per cent of the true value), and you suffer A$100,000 of storm damage, the insurer may only pay A$80,000, leaving you A$20,000 out of pocket.

Similarly, if your contents are worth A$80,000 to replace but you insure them for A$50,000, a total loss or a large partial claim will not fully cover your belongings.

Calculating the right sum insured requires careful assessment: for buildings, consider rebuild costs per square metre in your area, the age and construction type of your home, and current building materials and labour costs. For contents, itemise your possessions room by room, and update your sum insured annually to reflect inflation and new purchases.

Use the Coverage Calculator to Avoid Gaps

Working out the right level of cover can be complex, especially when balancing rebuild costs, replacement values, and the risk of underinsurance. The interactive coverage calculator helps you estimate the sum insured you need for both your home and contents, based on your specific circumstances, and flags common gaps that could leave you underinsured.

Before acting on any estimate, read the PDS and TMD for the policy you are considering, and consider obtaining personal advice from a licensed insurance adviser who can assess your individual situation, property characteristics, and cover needs.

General Advice Warning

This article provides general information only and does not take into account your objectives, financial situation, or needs. Before acting on this information, consider whether it is appropriate for you and read the relevant Product Disclosure Statement (PDS). You should consider obtaining personal advice from a licensed insurance adviser regarding your specific circumstances. Cover, exclusions, and terms vary by insurer and by state or territory. Verify current details in the PDS or with a licensed adviser before deciding.