What is home insurance excess?

Home insurance excess is the amount you pay out-of-pocket whenever you make a claim. It applies whether you have home (building) insurance, contents insurance or a combined policy that covers both.

While paying a home insurance excess might not seem ideal, it plays an important role in keeping premiums affordable and ensuring insurance remains sustainable.

Let’s take a closer look at how it works.

Excess exists to prevent insurers from being overwhelmed with smaller claims and to keep premiums reasonable for policyholders. If insurance covered every minor repair or replacement, premiums could rise dramatically, and no one wants that.

Here’s why excess pays an important role in the home insurance landscape:

• It discourages minor claims. Without an excess, insurers would be processing claims for every minor scratch, broken glass or small appliance replacement, gumming up the works and costing everyone more money.
• It helps keep premiums affordable. Since policyholders chip in when they claim, insurers aren’t footing the bill for every little thing. That means premiums stay more stable and affordable for the whole pool of policyholders.
• It gives you flexibility. Since most insurers let you choose your excess, you get more control over your premiums, since a higher excess usually means lower out-of-pocket costs at claim time and vice versa.

When you make a claim, the insurer deducts your excess from the total payout before covering the rest.

For example, if a storm causes $10,000 worth of damage to your roof and your excess is $1,000, you would pay $1,000, and your insurer would cover the remaining $9,000.

But excess doesn’t always work the same way across different types of home insurance claims.

Here's how excess applies, based on the type of home insurance you have.

Home (building) insurance claims

If you have home insurance (also known as building insurance), your excess kicks in when you claim for damage to the building’s structure. This usually includes walls, the roof, flooring and built-in fixtures like cabinetry, plumbing and electrical systems.

If a burst pipe causes severe water damage to your bathroom and repairs cost $8,000, and your building insurance excess is $750, you would pay $750, and your insurer would cover the remaining $7,250.

Contents insurance claims

Contents insurance covers belongings inside your home, such as furniture, appliances, electronics and valuables. If you make a claim for lost, stolen or damaged contents, you’ll usually pay a single excess per claim, not per item.

For example, if a burglary results in the theft of a laptop, TV and jewellery, you would file one claim for all stolen items and pay a single excess. However, insurers often apply sub-limits to certain categories of belongings, meaning your payout for specific items may be capped.

Excess for combined home and contents claims

If you have a combined home and contents policy, the way excess applies depends on your insurer.

• Single event, single excess. Some insurers charge just one excess if a single event affects both your home and belongings. If a storm damages your roof and also ruins your furniture, you may only need to pay the higher of the two applicable excesses.
• Separate excesses for home and contents. Other insurers treat building and contents claims separately, meaning you’d need to pay two excesses—one for the home damage and another for the affected belongings.

Since this can vary between insurers, it’s worth checking your policy’s product disclosure statement (PDS) or speaking with your provider to confirm how they apply your excess.

Excess amounts vary between insurers, and many policies allow you to adjust your excess based on what you’re comfortable paying.

• Home (building) excess. Often starts at $500 and can range up to $5,000 or more, depending on the insurer and policy.
• Contents excess. Can be as low as $100, though common options sit between $300 and $1,000.

Some combined policies apply a single excess across both home and contents, while others allow you to set different excess amounts for each. Always check your policy to understand how your excess is handled.

Depending on how the repair costs stack up against your excess, a claim might be worth it, or not. Let’s look at a couple of scenarios to see when making a claim makes sense and when it doesn’t:

Scenario 1: A major home claim that makes sense

A fire causes $15,000 worth of damage to your kitchen. Your home insurance excess is $1,500.

Since your insurer will cover the remaining $13,500, making a claim is clearly worthwhile.

Scenario 2: A contents claim that doesn’t make sense

You drop and break a coffee table, which costs $250 to replace. Your contents insurance excess is $500.

Since your excess is higher than the cost of replacement, making a claim wouldn’t benefit you.

Yes, increasing your excess generally lowers your premium. The higher the excess you’re willing to pay when making a claim, the less you’ll pay upfront for your insurance.

But it’s a trade-off. While you’ll save on premiums, you’ll incur more out-of-pocket if you need to claim, so make sure it’s an amount you’re comfortable with.

You might get lucky and have the excess waived in certain situations, depending on your policy and the nature of the claim. Examples include:

• Not at fault. If another party is responsible and you can provide their details (eg, a neighbour’s tree falls on your house).
• Specific circumstances. Situations like stolen keys and food spoilage from electrical malfunction, depending on the policy.
• $0 excess options. Some insurers offer policies with a $0 excess, often at a higher premium. These options are sometimes available to seniors or retirees.

Check your Product Disclosure Statement (PDS) to see what applies to your policy.

Yes. Even if a major event like a fire or flood makes your home uninhabitable, you’ll still need to pay your excess when making a claim.

However, many policies cover temporary accommodation if your home is unliveable, helping to ease the financial burden while repairs are underway.

Excess isn’t there to trip you up—it’s just how insurance balances risk and cost. Know what you’re in for, adjust it to suit your budget, and avoid surprises if you ever need to claim. Simple as that.