Your home insurance policy should fit your budget but also offer optimal coverage. It is important to understand what you're paying for while comparing home and contents insurance options.

Owning a home may be a universal dream in Australia, but it's one that comes with a great deal of responsibility. Maintenance and upkeep are continuous responsibilities, and natural disasters remain a lifelong concern. 

For many, home insurance is a recommended part of the mortgage application process to reduce risks associated with homeownership. So, it’s vital to purchase the right home insurance that not only fits your budget but offers the best coverage. 

How do you estimate the cost of home insurance?

There are a few key factors that come into play when determining how much your home and/or contents insurance premium may be. It’s worth familiarising yourself with these factors before you begin to compare insurance policies so you may better understand the costs involved.

Type of cover

To calculate how much your home insurance will cost you, it’s worth familiarising yourself with the two main types of coverage: total replacement cover and sum-insured cover.

Total replacement cover refers to, as the name suggests, the actual cost of replacing, rebuilding or renovating your home after a covered event, such as damage from a storm. Generally speaking, having total replacement cover will cost you more

Whereas sum-insured cover refers to a predetermined cost for your house and/or contents that is paid by your insurer in the event of a covered event. This can be more challenging to determine the cost of, as you can either:

  • Run the risk of either paying a higher-than-necessary premium to cover your home; or
  • Risk not paying enough and being out of pocket in the event the worst were to happen. 

For home and/or contents insurance, online calculators are available, often provided by insurance companies. provides a sum insured calculator that may assist you in estimating the cost of replacing your home contents.

Apart from these calculations, the cost of home insurance can also depend on whether you choose additional coverage for specific high-value items, or if you add personal effects coverage. For peace of mind, you might want to independently assess the value of your home and possessions before arriving at what you consider is an accurate estimate of the total value.

Excess amount

Like all forms of insurance, the excess is a critical part of the home insurance estimation. Excess is the sum you end up paying yourself upon a successful claim and helps adjust the cost of the insurance coverage. 

For example, if you're repairing your house and have to spend $25,000, paying an excess of $5,000 may see the insurance company pay the remaining $20,000 - allowing you to pay for repairs quickly. 

You may also choose to pay a higher insurance premium overall and pay a lower excess amount from your pocket. There may also be a cost included towards covering temporary relocation or other emergency expenses following a damaging incident. 

Repayment frequency

When you’re calculating the potential cost of your home insurance, be sure to factor in the payment frequency that best suits your budget. 

Most insurers will give you a choice of whether to pay for your home insurance monthly, quarterly or yearly and, generally speaking, an annual payment is typically cheaper than making regular ongoing payments. 

That being said, making smaller, more regular payments may be less stressful on your wallet than making one lump sum payment. If you cannot afford to pay 12-months worth of premiums in one lump sum, regular payments may work out to be more affordable for you. 

Your location

Home insurance costs vary across each state and territory, and each state and region. Some insurance providers may offer a lower premium cost depending on where you live, right down to the suburb. For example, if you live in an area with a higher crime rate, or higher likelihood of an event like flooding, you may be charged a higher premium compared with friends living in areas with a lower rate.

The average cost of home (building and contents) insurance is usually a few hundred to a thousand dollars a year. However, a 2019 Australian Competition and Consumer Commission report found that the average premium figures for home and contents insurance in Townsville - a town frequented by cyclones and other adverse events - were $3,088 annually, with 10% of residents paying premiums of $4,682. 

Calculating how much home insurance may cost you

To work out how much home insurance will cost you each year, consider using a home insurance calculator and estimating your costs before contacting a home insurance specialist or broker. 

What you choose to pay can be a question of the level of complexity you are comfortable with and weighing whether contents insurance can lower the cost of home insurance.

Unfortunately, no two home insurance policies are going to be the same, and only you will be able to work out which is best for you. Comparing home insurance options may give you a firm idea of where to spend your money and how much it will cost you over the long term.