The basics of building insurance cover

What is building insurance?

Building insurance covers your home’s structure, permanent fixtures and fittings from loss or damage. It can cover the cost of repairing, replacing or rebuilding your home after events such as fire, storm damage and flood. Generally, building insurance policies cover things such as:

• Walls
• Ceilings
• Floors
• Roofs
• Doors and windows
• Fitted kitchens
• Built-in cupboards and bathroom suites

Items such as garages, solar panels, fences and sheds are sometimes covered as well, depending on the policy.

Many insurance providers offer building insurance on its own or bundled as home and contents insurance, which covers your belongings and furniture inside your house as well as your building.

There are two main types of building insurance:

• Sum insured: This type of policy provides cover to repair or rebuild your property up to a set amount, chosen by you. Your insurance provider will pay up to this amount if you make a successful claim. 
• Total replacement: This type of policy is less common and provides cover for the total amount it costs to replace your building after an insured event. Total replacement cover tends to be more expensive than sum insured cover. 

Building insurance lingo explained

• Building replacement value: the amount it would cost to rebuild your property at current market prices.
• Excess: the amount you pay out of pocket when you make a successful claim. 
• Exclusion: specific events or things not covered by your policy – for example, deliberate damage.
• Insured event: an event covered by your policy, such as a fire or storm.
• Premium: The cost of cover, usually paid monthly or annually.
• Product disclosure statement (PDS): outlines all the important terms and conditions relating to your insurance policy, including what’s covered and what’s not.
• Sum insured: the amount your home is covered up to
• Total replacement: covers the entire cost of rebuilding or repairing your home.

What does building insurance cover?

Typically, building insurance covers loss or damage from events such as:

• Fire and explosion
• Flood
• Storm
• Earthquake
• Lightning
• Theft and burglary
• Malicious damage
• Impact (such as falling trees)
• Escape of water or other liquid (such as burst pipes)

Some building insurance policies will also cover things like:

• Emergency accommodation if your home becomes unliveable
• Accidental damage – for example, accidentally smashing a window with a cricket ball
• Debris removal after an insured event

Every policy’s coverage is slightly different, so make sure you read the (PDS) before agreeing to your new policy .

What does building insurance exclude?

Depending on your policy provider and the level of cover you’ve chosen, building insurance may exclude cover for damage caused by the following:

• General wear and tear
• Neglect of your property
• Bad workmanship
• Damage caused by insects, birds or other pests

Leaving your home unoccupied may also exclude you from building insurance cover, however most insurers will continue to cover your home as long as you’re not gone for more than 30 days. Be sure to let your insurance provider know if your home will be vacant for an extended period of time, as there may be some restrictions to your cover.

How much building insurance cover do I need?

As a general rule of thumb, you’ll want enough cover to rebuild your home at today’s prices. Unless you opt for total replacement cover (which is typically more expensive), you’ll need to figure out your sum insured – that is, how much it would cost to rebuild or replace your property. 

Fortunately, you don’t have to be a building materials expert to do so. Use our Building Calculator to estimate your rebuild costs and help determine the right level of cover for your home. 

What happens if I renovate?

Renovations can affect how much it would cost to repair or rebuild your home, which could change how much cover you need. And, in some cases, you may not be covered if you plan to build, renovate, make alterations or additions, or demolish a building at the site. Most insurance policies require you to notify the insurer of what work you’ll be doing.

So, if you’re thinking about making updates to your home, speak to your insurance provider first.

How much does building insurance cost?

This depends on the insurance provider and your policy, but there are some common factors that could affect the cost of your cover:

• Level of cover: a higher level will generally mean a higher premium
• Your home’s location: living in an area with a high crime rate, or an area that’s susceptible to flooding or bushfire, could raise your premium.
• Your home’s age: older homes may be seen as riskier and cost more to insure.
• Your excess: generally, the higher the excess you choose, the lower your premium will be.
• Your payment schedule: you can often save on your premium by paying annually rather than monthly.

Building insurance is cover you can count on if something unexpected happens. It’s also something you may be required to have upon exchanging contracts or reaching settlement as part of your home loan agreement.

By choosing the right building insurance – and adding contents insurance for your possessions – you can rest assured knowing that your home and its belongings are covered.