Home Insurance Brokers: directory of firms

A sum insured policy pays up to a set amount that you nominate. A total replacement policy is written around the full cost of rebuilding. Moneysmart lists this as one of the things to compare when choosing a policy, alongside exclusions, excess and premium.

Some sum insured policies add extended cover above the nominated amount, which can help if rebuilding costs come in higher than expected after a total loss. Check whether it exists, how much it adds, and what conditions attach to it, because it is the mechanism that softens a modest underestimate.

The averaging clause is the part homeowners consistently miss. It limits the insurer's liability to the proportion of the replacement value that has been insured, and that limitation applies to all claims under the policy, not just a total loss or a complete rebuild.

So a home insured for two thirds of its rebuild cost is not simply exposed on catastrophe. A storm-damaged garage repair is reduced by the same proportion, and the owner covers the balance. Moneysmart's worked examples show exactly this, and they are worth reading before a renewal rather than after a claim.

Storm cover generally includes damage from lightning, cyclones, strong winds, rainwater, hail and snow, and usually rainwater run-off and water overflowing from stormwater drains. Rainwater is normally defined as water that falls from the sky.

Flood has a standard definition for home and contents insurance: the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal or dam. In a high flood risk area, cover costs more or may be excluded altogether.

Fire cover, including bushfire, generally requires a flame to have caused the damage, so heat-related damage such as scorching and melting, and smoke, ash and soot damage, may not be covered. Common exclusions include a bushfire occurring less than 72 hours after the policy was bought, intentional fires, and fires caused by negligence or recklessness.

Moneysmart's advice at renewal is not to simply accept the notice. Check that the sum insured still reflects inflation and any changes you have made to the property, that the excess is still affordable, that the policy covers the risks that matter to you, and whether any exclusions or limits have changed.

Insurers must provide a Key Fact Sheet for their policies, with information and layout set by government, which makes comparing easier than reading two product disclosure statements side by side. Use the Key Fact Sheet to shortlist and the PDS to confirm the detail before switching.

If a claim is approved and involves significant rebuilding, you should receive a written scope of works. An insurer may offer a full or partial cash settlement instead of arranging repairs, and where that is not the only option available you must be given a Cash Settlement Fact Sheet setting out alternative settlement methods, the sum insured, the total offered, a breakdown of each component, a statement suggesting independent advice, and your right to request a review.

ASIC's review of home building claims from Cyclone Jasper found that 63 per cent involved a full or partial cash settlement and 52 per cent of settlements involved only one quote, 73 per cent of those from the insurer's preferred supplier. You can get your own quotes, ask the insurer for more, or refuse a cash settlement. If the claim arose from a natural disaster and was finalised within one month of the event, you have 12 months from finalisation to ask for a review.