How to make home insurance more affordable

Fact Checked
Updated 15/04/2024
How to make home insurance more affordable

Time to read : 4 Minutes

Scientists have been saying for some time now that extreme weather events such as floods, storms, cyclones and bushfires are only going to get worse with climate change. 

In recent years, a series of natural disasters, such as the floods in Lismore, a tornado-like storm in Gladstone and bushfires across the state of Victoria – to name a few, have cost billions of dollars of damage to homes including property loss. So it’s no surprise that insurance companies have raised their premiums to cover their costs. 

But these increases have got to the point that home and contents insurance is no longer affordable. 

According to a report by Actuaries Institute, nearly one in eight households is facing home insurance affordability stress. 

Who’s most at risk of insurance affordability stress?

People who live in high risk natural disaster areas are not the only ones finding home insurance less affordable. 

Low income earners, older residents, single adult households, renters and people with limited savings are in the same boat. 

Be aware: According to the Insurance Council of Australia (ICA), around 80% of households are likely to be underinsured. This means their policy may not cover them adequately if they need to put in a claim, leading to out-of-pocket costs.

Recommendations such as reducing development in high-risk areas, upgrading building codes to minimise the impact of climate change, and government insurance subsidies for low-income households may sound like good future options. But what about the present?

If a freak storm hit tomorrow and your roof was torn off, where would that leave you if you have no home insurance or are underinsured? Let’s take a closer look at what to consider for your home insurance and ways to make it that little bit more affordable.

Prioritise including the options you need

Don’t feel pressure to take out the top plan as it’s not necessarily the best one for you. Consider the environment you live in. If you’re surrounded by bush, you’re at risk of bushfires. If you live on a floodplain and your home’s not elevated, flood cover will be important.

There will always be some ‘nice to have’ options but leaving these out can help you to save.

Compare insurance policies

Once you’re clear on what you need, shop around. You may find savings of hundreds, if not thousands of dollars from one insurance company to another, so it pays to do your homework and don’t just accept the first plan you come across. 

And while at it, always remember to check the fine print. As an example, will you be covered for a pluvial flood or are there any conditions that could make your policy invalid if you're away for a lengthy period of time? 

There are many important considerations when comparing policies, so pay attention to the T&Cs.

Pay annually, not monthly

Many insurance companies try to make it more attractive for policy holders to pay premiums upfront by offering discounts.

Not everyone can afford this option, especially if your property is in a flood or fire risk area, but renters who are only paying for contents insurance might make some savings here.

Determine your excess

Similar to health and car insurance, this is the amount of money you need to pay when putting in a claim. The greater your excess, the lower your premiums are likely to be. 

Be aware: if you need to make a claim, a higher excess means you need to pay more before your insurance company covers you. In reality, it may mean some claims aren’t… well, worth claiming.

For example, if your excess is $2,000 and the cost of repairs is $800, you’re unlikely to contact your insurer. So there’s a risk you could be paying for insurance you’re not using and repairs on top of this.

Bottom line

You can’t stop freak weather events and they’re only going to get worse with climate change. But what you can do is take a good look at your insurance policy. Make sure it covers what you need for where you live, shop around and save.

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The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions.