Australia's Approaching Home Insurance Crisis

Australia is approaching an insurance crisis due to escalating home insurance premiums and increased risks from natural disasters. This situation has led more homeowners to consider going underinsured or uninsured amidst a sustained cost-of-living crunch.

Key Statistics and Risks

The scale of the problem is significant, with a growing number of homes at risk and many properties inadequately covered:

• In 2022, nearly 5% of Australians experienced their homes being destroyed or damaged by weather-related disasters.
• The Climate Council estimates over 650,000 homes are currently at "high risk" of damage or destruction by natural disasters, with an additional 100,000 homes potentially reaching this status within 25 years.
• As of 2023, the Household, Income and Labour Dynamics in Australia (HILDA) Survey indicated that one in 20 homes is underinsured, meaning coverage is insufficient for a full rebuild.
• Approximately one in 30 homes lacks any home building insurance.
• Collectively, underinsured and uninsured properties represent at least $119 billion in value, with about 300,000 of these homes still carrying mortgages.

Consequences of Underinsurance and Lapsed Policies

Cutting home insurance can lead to significant financial risks for homeowners.

Homeowners who lose their uninsured or underinsured property while still holding a mortgage may face debt for a non-existent asset.

Lapsing on full building insurance can also breach mortgage contracts, potentially leading to forced place insurance, which banks procure on behalf of the homeowner at a significantly higher cost.

Additionally, allowing a policy to lapse can result in losing favorable rates and discounts, leading to higher premiums upon renewal due to an increased risk profile and current market rates.

Rising Costs and Potential Solutions

Australians faced substantial increases in home and contents insurance premiums in 2025, with a national average rise of 14% from 2024. Victoria saw a 17% increase, and New South Wales an 18% increase.

Despite these rising costs, options exist to mitigate financial strain and risk:

• Switching Insurers: An analysis by Canstar found that switching to a more affordable insurer could result in an average annual saving of $766.
• Home Resistance Funds: New South Wales and Queensland offer funds to help homeowners in at-risk areas make properties safer, which can also reduce insurance premiums.
• Disaster Resilience Investments: Spending approximately $30,000 on retrofitting homes in bushfire-prone areas can improve safety ratings by up to two stars. Several insurers now offer premium discounts for properties with improved disaster resilience.