A recent review by consumer advocacy website CHOICE has identified four home and contents insurance policies that may not offer good value for Australian consumers.
The findings come as rising living costs and increasing insurance premiums put additional financial pressure on many households.
CHOICE evaluated more than 50 policies, taking into account key factors such as:
Daniel Graham, an insurance expert at CHOICE, pointed out that several of the lower-rated policies fell short in multiple areas, making them less suitable for consumers seeking comprehensive protection at a reasonable cost.
CHOICE assigned this policy its lowest overall score, with an expert rating of 46%. The policy was critiqued for both its features score (41%) and price score (53%).
According to the consumer website, the policy lacks standard coverage found in many other offerings, such as motor burnout and food spoilage protection.
Notably, the policy’s Product Disclosure Statement (PDS) does not include coverage for general theft unless there is “forcible and violent entry,” which could leave consumers unable to claim for theft in some scenarios. This restriction means that if a thief gains access without causing damage, policyholders may struggle to secure compensation.
Both of these policies, which are underwritten by Hollard, received low overall ratings of 47% and 49%, respectively.
The coverage offered by these two policies is nearly identical, but CHOICE experts noted that they lack important features such as underinsurance protection, which can cover additional rebuilding costs if the insured amount falls short after a total loss.
Although customers with health insurance through Bupa or AHM may receive discounts on home insurance, the consumer website claimed that these discounts may not compensate for the policies’ higher costs compared to other offerings in the market.
This policy was rated 52% by CHOICE, receiving one of the lowest price scores (25%) despite a features score of 69%.
While the Guild Home Elite policy provides solid coverage, including a 20% underinsurance safety net, it was found to be significantly more expensive than comparable policies.
In a price comparison based on 5,000 customer profiles, this policy ranked as one of the most expensive options, with its quotes exceeding others by a substantial margin in some cases.
CHOICE’s review adds to ongoing discussions about underinsurance risks in Australia.
A survey by Compare the Market recently revealed that nearly one-third of policyholders may be underinsured because they estimated the value of their home and contents rather than using more accurate methods.
According to the Australian Securities and Investments Commission (ASIC), as many as 80% of homeowners could be at risk of underinsurance, which would leave them vulnerable in the event of a major disaster or unexpected claim.
In addition to underinsurance concerns, rising premiums are causing more Australians to experience financial stress.
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The Actuaries Institute reported that 1.6 million households are struggling with insurance affordability, an increase of 30% from the previous year.
It reported that the average household now spends the equivalent of 9.6 weeks’ income on home insurance premiums, driven by a 9% year-on-year increase in costs.
Climate-related disasters are exacerbating the situation. According to the Insurance Council of Australia (ICA), insured losses from extreme weather events have surged, with the industry handling $2.19 billion in claims during the 2023-24 financial year alone.
The ICA noted that extreme weather has led to a significant increase in claims, impacting the overall cost of insurance for many policyholders.
