Home and contents insurance is one of the most important financial products an Australian homeowner or renter can hold — but many policyholders don't discover what their policy excludes until they make a claim. Flood damage, wear and tear, unoccupied property periods, and specific natural disaster exclusions have left thousands of Australians underinsured or uninsured when disaster strikes. The product disclosure statement (PDS) is the document that defines your cover, but at 50-100+ pages, most people don't read it carefully. Understanding the key exclusions before you commit can prevent devastating financial surprises.
What is a Policy Exclusions?
A home and contents insurance policy is a contract between you and an insurer under which the insurer agrees to compensate you for loss or damage to your home (the building structure) and/or its contents (personal belongings) in exchange for premium payments. Policies are typically offered as home only, contents only, or combined. The policy is governed by the Insurance Contracts Act 1984 (Cth) and regulated by ASIC. The key documents are the Product Disclosure Statement (PDS), which sets out the terms, conditions, and exclusions, and the Certificate of Insurance, which confirms your specific cover details.
Red flags to watch for
After the 2022 floods, many Australians discovered their policies excluded flood or defined it differently from 'storm damage.' Since 2012, a standard definition of flood is required, but some policies still exclude it or charge a high additional premium for flood-prone areas.
If your home is insured at market value rather than full replacement cost, a total loss could leave you significantly underinsured, particularly if building costs have increased.
Insurers commonly deny claims by arguing damage was caused by gradual deterioration rather than a sudden event. Check how broadly this exclusion is worded — some policies apply it aggressively.
Most policies exclude cover or limit claims if the home has been unoccupied for more than 60 consecutive days. If you travel extensively or have a holiday property, this can void your cover entirely.
Power surges and motor burnout in appliances are common claims. If the policy excludes these or caps them at a low amount, you'll pay out of pocket for expensive appliance replacements.
If your sum insured is less than the actual value of your contents, some policies apply an averaging clause — meaning they'll only pay a proportionate share of any claim, even for partial losses.
Your legal rights
Under the Insurance Contracts Act 1984 (Cth), insurers must act with utmost good faith (s. 13), provide clear disclosure of policy terms, and cannot rely on an exclusion that wasn't clearly disclosed. Section 54 prevents insurers from refusing a claim solely because of an unrelated breach of policy terms. The duty of disclosure was reformed by the Insurance Contracts Amendment Act 2021 — for consumer contracts, the insurer must ask specific questions rather than relying on a general duty of disclosure. If your claim is denied, you can complain to the Australian Financial Complaints Authority (AFCA), which provides free external dispute resolution. The General Insurance Code of Practice (2020) also imposes standards on how claims are handled.
Questions to ask before you sign
- 1Is flood explicitly included in the policy, and how is 'flood' defined?
- 2Is the sum insured based on replacement cost or market value?
- 3What is the unoccupied property period and does it affect my situation?
- 4Are there any averaging or co-insurance clauses for under-insurance?
- 5What is the excess for different claim types (especially natural disaster events)?
- 6Are accidental damage and motor burnout included or optional extras?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.