Understanding your product disclosure statement for home insurance

A product disclosure statement (PDS) is one of the most important documents you’ll come across when considering home insurance. It’s your single source of truth -  everything you need to know about your policy is packed into this document. 

From the coverage to the exclusions, it lays everything out clearly. If you haven’t yet read yours, now’s the time to dive in. Here's why.

A product disclosure statement is an uber-official document that insurers are required to provide, regulated by financial authorities to make sure everything is clear and above board. It acts much like a contract that leaves no ambiguity about what you are covered for and under what circumstances. 

Your home insurance PDS will outline in clear detail, using straightforward language, your coverage, the conditions under which the coverage applies, and the specifics of any claims process.

It’s also extremely accessible. Insurers are required to provide a PDS to all prospective customers, so you can usually download it from the insurer’s website before you even sign up. And if you do sign up, it’s always there for you to refer back to.

As we’ve described, a home insurance PDS lays out all the key information about your policy. Here’s a look at the main topics outlined in a PDS.

Items covered

The PDS outlines what parts of your home and belongings are protected, breaking it down into the following:

• Building. The PDS outlines what’s considered part of the home’s structure and how it’s covered under building insurance. This includes the main dwelling and permanent fixtures, with details on whether external structures like garages, fences or sheds are included.
• Contents. The PDS will also explain how the personal belongings inside the home are treated (if you have contents insurance), along with any limits for certain items like jewellery, electronics or collectibles. It will also explain if items stored in places like sheds or garages are included, and whether high-value items need to be listed separately.

Covered events and specific exclusions

The PDS will also specify which events or ‘perils’ you’re protected against, for example storms, fire, theft, vandalism and natural disasters. 

But it will also include information on where specific coverage does not apply. For example, you might find that under the ‘fire’ section, that policies taken out within 24-72 hours of the fire will be excluded from cover. This specific exclusion may not apply to other types of damage, for example, theft.

Policy limits

A PDS will also show the maximum amounts payable under different scenarios. This is more relevant to contents cover. That’s because the value of your home is typically agreed upon separately between you and the insurer and is documented in your certificate of insurance.

But with contents insurance, there are usually limits, or caps, for certain categories of items, and sub-limits for individual items within each category.

For example, you might see that a standard policy will only pay up to $2,500 for jewellery under any one claim. However, there may be opportunities to get this increased with additional cover (see optional extras next). 

Optional extras

Many policies offer optional extras that apply protection over and above the standard cover. Common examples include accidental damage, portable contents cover, or extra cover for especially high-value items like jewellery or artwork.

Here you’ll find information about these including many of the same details mentioned above including, when you’re covered and when you're not.

Definitions

Insurance terms can be specific and sometimes confusing. The definitions section clarifies terms like ‘accidental damage’ and explains how a ‘flood’ is different to ‘rainwater runoff’’.

General exclusions

We already discussed that you’ll find exclusions for certain specific events listed in the coverage section. However, there will usually be a list of general exclusions that apply to the entire policy, meaning you won’t be covered no matter what.

Common examples where your policy won’t cover you include if the damage is due to lack of maintenance, illegal activity or acts of war/terrorism.

Excess

The PDS won’t detail the specific excess you’ll have to pay. You’ll agree on that separately and upon taking out the policy, it will be listed on your Certificate of Insurance (more on that later).

But it will explain when the excess applies and if there are additional excess that apply under special circumstances. Information on when your excess applies is usually found within the relevant coverage sections of the PDS, where each type of claim or event is discussed.

But there's often a dedicated excess section that defines the various types of excess and outlines the logistics of paying the excess, such as whether it's deducted from the claim payout or paid directly to the service provider. 

Claims process

Finally, this part of the PDS helps you understand how to lodge a claim if you need to use your policy. It typically explains who to contact, what documents are needed, and the timeline for processing.

It will also explain how to appeal a denied claim if you disagree with the decision.

Understanding your product disclosure statement is a key first step in getting comfortable with your policy. Even if you’re still just comparing policies, it will help you put each option under a closer microscope. Here’s how to read yours:

1. Start with the table of contents. This outlines the document's structure, helping you quickly locate any particular section you want to explore further.
2. Review the Definitions. Familiarising yourself with important definitions will make the rest of the PDS easier to understand.
3. Examine coverage and exclusions. Explore how the PDS details its coverage and exclusions. Many will include useful tables that make it easy to understand how different events or items are treated differently.
4. Bookmark the claims process section. When damage hits, you don’t want to be scrambling to find out how to make a claim. Save this information somewhere handy.
5. Contact your insurer. If there’s anything you don’t understand about the PDS itself or anything in it, don’t forget to contact your insurer (or potential insurer) for clarification.

By following these steps, you'll be a PDS pro in no time!

While the home insurance PDS outlines all the key details of a home insurance policy and serves as your go-to resource for understanding how the policy works, it doesn’t confirm that you’re covered.

That’s where the certificate of insurance (COI) comes into play. The COI serves as proof that you hold the policy. It confirms the coverage, policy number, important dates, your premium and excesses, but it doesn’t go into the fine print like the PDS.

Think of the COI as a snapshot of your policy details, while the PDS is the full guide to how your cover works.

A PDS can feel like a lot, but it’s the clearest path to understanding exactly how your policy works. Taking the time to get familiar with it now makes it easier to find answers when you need them. You’ll thank yourself when it comes time to claim.