Insurance Affordability in Australia

Australian home and contents insurance premiums have increased significantly in recent years, and the pressure on household budgets shows no sign of easing. The causes are structural — not temporary — and understanding them helps homeowners make better decisions about their coverage.

• Climate change and natural disaster frequency: Australia has experienced an increase in the frequency and severity of weather events — floods, cyclones, hailstorms, and bushfires. The Insurance Council of Australia has documented that insured losses from natural catastrophes have grown substantially over recent years, and that trend is reflected in the premiums all homeowners pay.
• Reinsurance costs: Australian insurers pass on a significant portion of their catastrophe risk to global reinsurance markets. As global reinsurance costs rise — driven by catastrophe events around the world — those costs flow through to domestic premiums.
• Supply chain and labour costs: The cost of building materials and skilled trades increased substantially following supply chain disruptions and increased demand. Because property insurance pays the cost of restoring buildings, insurers adjust premiums to reflect the higher replacement costs they are now covering.
• Higher rebuild costs per property: As construction costs have risen, the amount needed to actually rebuild a damaged home to its pre-loss condition has increased. Policies that do not keep pace with rising rebuild costs create an under-insurance gap — even for homeowners who believe they are adequately covered.

The Insurance Council of Australia and AFCA have both publicly identified affordability and under-insurance as systemic issues facing Australian households — particularly in regions with elevated natural hazard exposure.

Under-insurance occurs when your sum insured — the maximum your policy will pay to rebuild or repair your home — is lower than the actual cost to restore the property after a total or major loss. It is one of the most common and consequential problems Australian homeowners face after a disaster, and it is frequently not discovered until the claim is made.

• The gap appears at claim time: If your home suffers a major loss and the actual rebuild cost exceeds your sum insured, your insurer pays only up to the policy limit. You are responsible for the shortfall — which can represent a substantial sum in today's construction market.
• Co-insurance clauses: Some policies include provisions that reduce the payment on partial losses proportionally if the property was under-insured at the time of the claim. Always read your Product Disclosure Statement to understand how your policy treats partial losses and under-insurance.
• Contents under-insurance is equally common: Many households estimate the value of their contents informally and do not update that estimate over time. The cumulative value of furniture, electronics, clothing, appliances, and personal items is often higher than policyholders assume.
• Rising costs widen the gap over time: Even if a sum insured was accurate at the time the policy was taken out, rising construction and labour costs mean the gap between insured value and rebuild cost can widen each year the sum insured is not updated.

AFCA has noted in its published reporting that under-insurance disputes — where policyholders discover after a loss that their coverage is insufficient — are a recurring and avoidable source of consumer hardship.

Discovering you are under-insured in the middle of a disaster recovery is a stressful position to be in — but there are practical steps you can take to make the most of your coverage and manage the gap.

• Lodge your claim immediately and completely: A thorough, well-documented claim ensures you receive the full amount your policy provides. Do not assume your insurer will automatically identify every item of loss — document everything and claim for it explicitly.
• Obtain an independent scope of works: An independent restoration contractor's assessment of the full cost to restore your property gives you an accurate picture of the gap between the claim payout and the actual work required. This also provides a basis for negotiating with your insurer or pursuing any dispute through AFCA.
• Prioritise make-safe and essential repairs: If your insurer approves a partial payment, use it to fund the most critical work first — structural make-safe, weatherproofing, and essential services restoration. A qualified restoration contractor can advise on the most effective use of available funds.
• Ask about hardship provisions: The General Insurance Code of Practice requires insurers to have processes for customers experiencing financial hardship. If a claim shortfall is creating significant hardship, raise this with your insurer formally and ask what assistance is available.
• Access AFCA if the claim is handled poorly: Being under-insured does not prevent you from disputing the way your insurer handles the claim. If the insurer acts unreasonably, delays without justification, or misapplies your policy terms, AFCA can intervene.

The most effective way to address under-insurance is to review your sum insured before a loss occurs. This is particularly important in the current environment where construction and contents costs have risen across the board.

• Use a building cost calculator: Several insurance industry and independent sources provide online building cost calculators that estimate the rebuild cost for your property based on location, size, construction type, and features. The Insurance Council of Australia and individual insurers publish these tools. The estimate should reflect full demolition and rebuild, not just repair — and should include site costs, professional fees, and council requirements.
• Review your contents regularly: Walk through your home and list every item of value — furniture, appliances, electronics, clothing, sporting equipment, jewellery, tools, and artwork. The total is often higher than initial estimates. Update this figure at each policy renewal.
• Consider an independent building valuation: For older, heritage-listed, or unusual properties, a professional building valuation provides a more accurate rebuild estimate than a generic calculator.
• Review your policy at each renewal: Do not simply auto-renew without checking whether the sum insured and the coverage terms still reflect your property and its current value. Pay particular attention to any changes in your property — renovations, extensions, or improvements all affect rebuild cost.

This guide does not provide financial advice. If you are uncertain about the appropriate level of coverage for your property, consult a licensed financial adviser or insurance broker.

When an insurance payout does not cover the full cost of restoring your property, the way you engage with the restoration process matters. The Disaster Recovery platform connects homeowners directly with vetted, IICRC-certified restoration contractors — removing the intermediary costs that can widen the gap between available funds and completed work.

• Transparent, itemised pricing: Every contractor on the Disaster Recovery platform provides a full scope of works with itemised costs before any work begins. You know exactly what the work costs and can make informed decisions about prioritisation and phasing if your available funds are limited.
• No-obligation assessment: You can request a professional assessment and scope of works at no obligation. This gives you an accurate picture of the full restoration cost, independent of your insurer's assessment — which is particularly important when you suspect you may be under-insured.
• Direct contractor relationship: You contract directly with the restoration contractor rather than through a managed repair network. This means you have full visibility of the work being done and the costs being incurred, and you can prioritise work based on your available coverage.
• Finance options available: For homeowners managing a gap between insurer payment and full restoration cost, finance options through Blue Fire Finance are available to help bridge the shortfall.

Disaster Recovery's role is to connect you with qualified tradespeople — the outcome of your insurance claim is between you and your insurer. Our contractors provide the documentation and professional service that gives your claim and any dispute the strongest possible foundation.